DSSI Diamond Shipping correction seemingly completeHello, thanks for viewing.
This is an equity in an industry facing significant challenges and uncertainty. There is likely to be oversupply of vessels until demand picks up again (who knows when that will be). But, there are multiple technical reasons to believe the main correction has completed and that this equity is sufficiently undervalued to be attractive.
A normal Elliot Wave correction is a three wave correction, wave A being 3 or 5 sub-waves, wave B being 3 sub-waves, and wave C is always 5 waves. I have labelled the main (A), (B), and (C) waves and the sub-waves (the sub-waves in wave (A) are not evident - but it serves as a basis for charting the depth of the total correction..
A normal rule of thumb is that wave C will extend to around 100% the length of wave A - in this example the 100% extension is almost correct to the cent. The total drop
If this view is correct, a correction, or the start of a new impulse wave up is commencing (I would put my money on a partial correction upwards in the face on continuing low demand for oil shipping).
So, I am sharing my trade for a target of +49% and possible 10% downside (stop below the swing low at $6.53) - a risk to reward ratio (RRR) of 4.85. Why the 0.382 Fib retracement level? Because it is a conservative level to aim for.
You could target the 0.236 Fib level if you are even more conservative for a ~26% upside and a RRR of 2.55:1.
Because the chart is just so clear I am willing to enter a small position without too much fundamental analysis - due to that, it will not be a large position (unless I do some FA and decide it is unexpectedly has a really good outlook). But I am comfortable with that. Generally a real money trade is 70% FA and 30% or less TA but I have been researching and applying Elliot Wave pretty much full time for 3 years now and I feel Elliot Wave is sufficient in some circumstances to trigger a trade even in an industry that doesn't look great generally and that I know nothing about.
In 2020 I bought a few stocks for different reasons, the ones primarily based on EW (or at least I was initially led to research these Companies based on the chart) indicating the end of a correction have been the;
a. Best performing by far, and
b. The quickest to show a return.
It makes sense a little, If a major price correction started well before the S&P500 steep correction in March 2020 and is showing signs of exhaustion, then maybe, the equity is already somewhat undervalued. If a stock like that has a decent cash flow as well, investors may flock to it in lieu of much data to point towards (as we have never been in a similar position).
Protect those funds
