This Ship Is Sailing Higher

GNK $25.46 +0.36 -- Genco Shipping

I am promoting GNK from our watch list to our play list. Shipping stocks have been showing relative strength throughout the month of November. GNK did see some profit taking on Thursday but it was due for a correction. Broken resistance near $24.00 offer new support. We were suggesting a trigger to buy LEAPS at $22.50, which is still a real possibility if the S&P 500 continues to slide lower. However, this stock has been marching to the beat of its own drum for months now and may not be so sensitive to the market's daily twists and turns.

I did recently read some commentary on how the shipping sector could be poised for trouble with a glut of new ships due to come online. Fortunately that appears to be a problem for the late 2010-early 2011 time frame. Short-term, if the global economy continues to improve, the shipping stocks should outperform.

Here's the plan. I would open small bullish LEAPS positions now. If the market does continue to retreat then we can look to add to our LEAPS position if GNK dips to and bounces near the $22.00 level. I'm listing our initial stop loss at $19.65, just under the simple 200-dma. More conservative traders may want to use a stop closer to $22.00 instead. Our long-term target is $39.00.

Use the 2011 January calls (Entry point - now, at current levels)

BUY CALL 2011 JAN $30.00 strike (OKJ-AF) current ask $5.00

Chart of GNK: