The Trader Daily

 | Jun 11, 2014 | 7:30 AM EDT  | Comments
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Stock quotes in this article:

hero

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jcp

,

spy

,

sgen

Tuesday's SPDR S&P 500 Trust (SPY) auction unfolded about as expected. With general expectations of a balancing, or consolidating, market, we entered Tuesday's session with an eye toward two-way trading between $195.10 and $195.70/$195.80. And while our upside area of interest failed to come into play, we saw solid responsive buying as sellers attempted to auction prices beneath $195.10.

Given the general lack of volatility during Tuesday's session, we'll make only minor adjustments to Wednesday's trade plan.

A generally quiet, two-way session is again expected on Wednesday. With targeted balance regions of $195.10 and $195.65/$195.73, day-timeframe participants are expected to maintain a responsive strategy into those edges of balance until a more aggressive participant steps forward and breaks the market in a more definitive direction.

 

S&P SPDR (SPY) -- 15-minute volume profile
Source: eSignal

 

Tim Melvin, a fellow RealMoney Contributor and noted lover of cheap and undervalued stocks, has written extensively on Hercules Offshore (HERO). He's drawn to the name for several reasons. The most obvious are the low price-to-book value (currently at 88%), and the ongoing accumulation of shares by company insiders. Most recently, Director Steven Webster bought 25,000 shares on April 28 at a price of $4.35, after buying 50,000 shares on March 31, at a price of $4.56.

There's no denying the offshore market has been a treacherous area to be involved in. However, if the technicals are any indication, we may be seeing signs that the environment is beginning to improve (or at least stabilize). So, keeping in mind that I'm not calling for an immediate turn in the offshore (shallow or deep) sector, I do see signs that this stock is trying to emerge from its multi-month bottom.

As you review the chart below, note the sustained improvement in the Relative Strength Index (RSI), the break above the multi-month downtrend line and the crossover of the shorter term 13-day and 30-day exponential moving averages above the more intermediate term 50-day simple moving average.

 

Hercules Offshore (HERO) -- Daily
Source: eSignal

 

As far as HERO is concerned, traders can either wait for the stock to make new swing highs above $4.89, or roll the dice and initiate a position in the hopes that the RSI is indicative of good things to come. In either case, the stock needs to remain above $4.22-$4.27 on a closing basis to avoid being thrown back in the penalty box.

Additional Notes:

  1. J.C. Penney (JCP) hasn't done a thing over the past two weeks, but I remain hopeful that it will ultimately push through $9.20 and challenge its mid-May swing high. For those eyeing the stock or already involved, I'd continue to focus on $9.20 as the upside trigger and $8 as the downside stop loss.
  2. Seattle Genetics (SGEN) traded up into our previously discussed $40-$41 target area on Tuesday. So if you're involved and haven't adjusted your stop-loss level (up from the $32.82 level), I'd encourage you to do so. In my view, short-term swing traders should consider selling some portion of the position now, targeting $42.50 (roughly the 200-day simple moving average) as the next area to scale back the position, and implement a trailing profit stop (on close) under $37.

Any trading or volume profile related questions can be posted in the comments section below, emailed to me at parkcityyeti@gmail.com or posted to my twitter feed @ByrneRWS

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