GO
Loading...

Shipping Stock About to Make a Comeback?

(Having trouble with the video? Click here!)

On March 15th, Jim Cramer recommended putting the dry bulk shippers on your radar as a possible 'buy'.

Although his thesis was somewhat involved, basically he said fundamentals were so bad, they couldn't get much worse. (Read More: As Shipping Struggles, Cramer Sets Course for Investors)

And he cited Diana Shipping as one of many ways to play the space – again listing a slew of fundamental catalysts.

However, sometimes fundamentals alone aren't enough to drive shares higher.

Considering Diana Shipping was a $40 stock 5 years ago and now trades for under $10 – Cramer thought it was prudent to also consult the technicals to see if they confirmed or denied the thesis.

For insights, the Mad Money host enlisted the help of top technical analyst, Dan Fitzpatrick, a Cramer colleague at TheStreet.com.

Following is Fitzpatrick's analysis.

First, Fitzpatrick is confident that the weakness is over. Looking at Diana's weekly chart, Fitzpatrick said Diana generated a significant pattern in July of last year called a dragonfly doji.

Although the pattern is somewhat complex, the takeaway is simple – it's a pattern that emerges at the end of a downtrend.

Fitzpatrick says that was the point where Diana Shipping simply couldn't go any lower – the bottom.

Dan Barnes | E+ | Getty Images

Now, looking forward, Fitzpatrick sees more positive signs.

First, the stock has been printing higher highs and higher lows, a constructive pattern. Also, the stock has made a bullish crossover – the 50-day moving average crossed above the 200-day.

Because the stock has likely bottomed and is now making bullish chart patterns Fitzpatrick is a buyer.

-----------------------------------------------------------
Read More from Mad Money with Jim Cramer
Make Europe's Pain Your Gain
Cramer's Quest: Next Pharma Powerhouse?
IPO Watch: Will Pinnacle Be High Point?
-----------------------------------------------------------

Looking at key levels, if the stock breaks out above its February 2012 high of $10.63, then Fitzpatrick believes it could be smooth sailing to $14, as that's the next ceiling of resistance, coinciding with the late 2010 high.

However, since it's almost impossible to pick a bottom, Fitzpatrick doesn't think you should wait to buy. He thinks at current levels it's ok to start at least a small position.

What's the bottom line?

Technical analysis seems to confirm Jim Cramer's bullish outlook on Diana Shipping. Both fundamentals and chart patterns seem to suggest the $9 stock may be headed to $14.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

Contact Mad Money

  • Showtimes

    U.S.
    Monday - Friday 6p ET
    Australia
    Saturday 8a, 1p, 7p SYD
    Sunday 12a, 1a, 8a, 7p SYD
    New Zealand
    Saturday 10a, 3p, 9p NZ
    Sunday 2a, 3a, 10a, 9p NZ
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.

Mad Money Moments

Cramer's New Book