On Oct. 21, many dry shipping stocks had their worst stock price performance in weeks. Genco Shipping & Trading (NYSE:GNK) plunged 12.8%, DryShips (NASDAQ:DRYS) fell 10.07%, and Eagle Bulk Shipping (NASDAQ:EGLE) dropped 8.04%, all amid much heavier-than-normal trading volume. Investors seem to have feared that dry shippers' bull market had come to an end. But was their panic premature?

Why Monday was particularly brutal
Since their rates peaked around $42,000 per day on Sept. 25, Capesize ships, the largest class of cargo vessels, have seen those prices plunge. Though rates have fallen by about one-third in the last month, they only dropped around 3% on Oct. 21 to $28,000 -- still much higher than the $18,000 and change that Capesize ships commanded a year ago.

What was different about Oct. 21, compared to the previous weeks? Instead of rising, rates for the Panamax, the next-largest class of ships, also dipped -- if only by $60 -- to $16,426.

As Capesize ship rates get very expensive, customers tend to split the Capesize cargo into two Panamax ships. So if shipping demand remains strong, Panamax rates will keep rising even as Capesize rates cool off. When investors saw both Capesize and Panamax rates decline at the same time, it spooked them. 

Genco Shipping & Trading is particularly vulnerable to declining spot rates. None of its ships are in fixed-rate contracts, leaving 100% of its revenue tied to the spot rates like a helpless victim.

Genco Shipping & Trading's average minimum daily spot rate to break even on the cost of operating its ships  is $16,669 as of last quarter. Its operating revenue for its fleet is around $1,000 to $2,000 less. That's a tough situation for Genco Shipping & Trading if it wants to survive.

DryShips, meanwhile, is better prepared than Genco Shipping. DryShips has its Capesize ships locked in long-term rates, but it's swinging in the breeze for most of its Panamax ships, most of which operate at the spot rate.

Investors may have treated DryShips a bit too harshly on mere speculation of a Panamax rate collapse. If the Panamax dip proves to be a false start, look for a quick rebound in DryShips.

Eagle Bulk Shipping appears to be the black sheep among the flock. While it ran straight down with the others, Eagle doesn't even own any Capesize nor Panamax ships. The entire fleet of Eagle Bulk Shipping consists of the smaller Supramax vessels; ironically, they had a great day on Oct. 21, jumping another $87 to $12,678 -- their highest rate in months.

Eagle Bulk Shipping tends to book most of its fleet in fixed-rate contracts, but most of those contracts expired or are expiring this year, leaving it wide open for increased revenue and cash flow.

Final foolish thoughts
It may be too early to tell if the party is officially for dry shippers, but clearly, investors fear being the last person standing.

Pay close attention to the daily spot rates for dry shippers, especially among Capesize and Panamax rates and their correlated changes. If they start to rebound, the Oct. 21 sell-off was unjustified, and you might have an opportunity to buy in at good prices. If both rates simultaneously keep declining, run for the hills.

Also, pay attention to which dry shippers unfairly fall alongside the rest of the sector, such as Eagle Bulk Shipping. Any knee-jerk, misplaced negative reaction to bad dry shipping news that doesn't affect an individual name, such as we saw with Eagle Bulk Shipping, could spell opportunity. 

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Nickey Friedman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.