U-Turn in Dry Ships

The following technical price pattern is extremely rare, but is worth ‘filing away for further research’ when it appears.

It has a variety of names, including ‘saucer bottom,’ “U-Turn,” etc but the pattern is defined by a slow and steady decline in price until an equilibrium (base) level is reached, and then demand picks up and price swings with a mirror-image of the prior slow downswing, forming a clear “U” type pattern.

In this particular instance, Dry Ships (DRYS), a stock that was doing extremely well this year and then all the sudden tanked exhibited this pattern intraday on the 5-minute charts:

Again, no pattern is ideal or perfect, and every day is unique, but you could almost draw two arcs that would form a “U” pattern.

Of particular interest is the increasing momentum divergence that developed from 11:00am until 1:00pm.

Notice how price continues to make new lows on the day and then we have an area of consolidation and then price begins its slow but stead ascent as a result of the sellers losing ‘momentum’ (or imbalance) and buyers gaining momentum (or imbalance).

Notice also how the 20 period EMA contains price both on the downside (until the 1:00pm break) and the upside (after 2:00). It’s an interesting yet well-watched moving average.

As always, when you see a pattern you like, catalog it and study it for future reference.