Sentiment Snapshot: Genco Shipping & Trading Limited (GNK)

              

The shares of Greece-based Genco Shipping & Trading Limited (GNK: sentiment, chart, options) have added nearly 7% in early afternoon trading, bolstered in the wake of a new deal.

More specifically, the dry bulk diva this morning announced that it inked a $65,000 per day, 46-to-62 month deal with Cargill International S.A. for use of its newly delivered Capesize vessel. As part of the agreement, which includes a 50% index-based sharing component, Genco will pay a third-party brokerage commission of 5%.

The vessel, deemed Genco Hadrian, is the sixth ship delivered under GNK's previously announced agreement to purchase 9 Capsesize vessels. The shipping sultan drew $96.8 million from its $1.4 billion revolving credit facility to purchase Hadrian, and today said that it expects to acquire an additional 3 vessels with the existing credit facility and cash flow from operations. The new purchases are slated for delivery in 2009.

The news, in conjunction with a broad-market boost, has shipped the shares of GNK more than 75 cents higher to hover near the $12.70 level.

From a longer-term perspective, however, the charts aren't as pretty. Since perforating support in the round-number $50 region in September, the security has shed roughly 75%. Further demonstrating the stock's technical troubles of late is its performance versus the broad market. During the past 60 trading sessions, GNK has underperformed the S&P 500 Index (SPX) by about 45%.

The stock is now wrestling with resistance at its 10-week moving average – a trendline that's limited all but a handful of GNK's rally attempts since it peaked near $85 in mid-May.

In light of the security's technical troubles of late, options players are skewed toward the bears' lair. Genco's Schaeffer's put/call open interest ratio (SOIR) – which measures options slated to expire within 3 months – of 0.89 registers in the 96th annual percentile. In other words, short-term options speculators have been more leery of GNK only 4% of the time during the past year.

Meanwhile, in parity with the pessimism in the options pits is the snowballing skepticism in the short-selling arena. During just the past month, short interest on the equity has skyrocketed roughly 49%, and now accounts for about 5.3 million GNK shares, or nearly 21.5% of the shipping sultan's total available float.

However, not everyone has boarded the bearish bandwagon. The shares currently boast an awe-inspiring 6 "strong buys," according to Zacks, compared to a mild 3 "holds" and no "sells."

Furthermore, the average 12-month price target on the underperformer rests at $30.07, Thomson Financial reports. In order to attain this grandiose goal – in a region the stock hasn't closed a session above since September – the shares of GNK would need to more than double from their current trading range.

In conclusion, in order to prove that today's muscle on the charts is more than just a brief vacation in the black, the shares of GNK will need to topple intermediate-term resistance. More specifically, the shipping czar will need to defeat its 10-week trendline, as this moving average has contained most of the stock's rally attempts during the latter half of 2008.

Should the security's current war with resistance prove futile, the remaining GNK enthusiasts among the analyst community could get spooked. A fresh round of downgrades and/or price-target reductions could act as a potential technical storm, amplifying selling pressure on the equity.

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