The Trader Daily

 | Jun 12, 2014 | 7:30 AM EDT  | Comments
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Stock quotes in this article:

spy

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bmrn

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scty

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ibm

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fcx

There was a surprising amount of concern when the SPDR S&P 500 Trust (SPY) sold off during the middle of Wednesday's session. For heaven's sake, if you look at the SPY on a daily chart, you can barely make out Wednesday's doji candle (because the overall range was so bloody small). My advice to those getting worked up over a $0.50 decline is this: Minimize your five-minute chart, take a deep breath and pull up a 30-minute or even a daily chart. Perspective is a wonderful thing. 

We began discussing the idea that the market was transitioning into a more balanced state after Monday's close. And that transition continues.

In my view, the most likely scenario in the SPY involves dip-buyers defending prices down toward $194, with sellers stepping forward to sell toward $195.70. The significance of $194 is that it was the high (premarket) print after the commencement of European Central Bank President Mario Draghi's press conference. The level also happens to represent the area of least acceptance going back to the upside break on June 4. The $195.70 level, as you can see on the chart below, represents the top of composite balance.

The bottom line is that as long as the SPY continues to close above $194, I see little reason for higher-timeframe bulls to break a sweat. This is a two-way rotation market that, while incredibly slow and lacking in volatility, lends itself to the flexible (day timeframe) trader who is willing to fade both edges of developing balance.

SPY, 15-minute
eSignal

Seattle Genetics (SGEN) has made it to within $0.20 of the $42.50 target on Thursday, and I believe it's time to look for a new horse in the biotech sector. My primary candidate is Biomarin Pharmaceutical (BMRN).

Biomarin exploded through both its 21-day exponential average and 50-day simple moving average on June 3, but since that time, it has made no real progress. My plan here would be to trade the stock long against $59.30-$59.75 (as usual, on a closing basis), with upside targets of $64 and $66. Due to the speed with which these biotech stocks can unwind, I wouldn't want a thing to do with the stock should it close beneath $59.30.

 

 

I've had my eye on a number of stocks in the solar sector recently. Stocks such as SunPower (SPWR), GT Advanced Technologies (GTAT) and SunEdison (SUNE) all look bullish and poised to break higher. A name more suited to dip-buyers and dumpster-divers would be SolarCity (SCTY).

SolarCity is currently trading beneath its 50-day simple moving average, and as a rule of thumb, I tread very lightly when buying stocks that are beneath that pivotal reference point. That said, considering the stock's outperformance on Wednesday when the broad market was struggling, the potential for a higher low on the daily chart and the slight improvement in the relative strength index, this might be worth a trade for short-term scalpers.

Assuming the stock continues to close above the $48-$48.30 area, a move toward $56.40 seems reasonable.

 

 

Additional Notes

If you're involved with IBM (IBM) on the long side, be aware that the stock is nearing a break of its mid-March swing low. I know a number of bulls are banking on a second-half 2014 turn in the overall business, but from a technical standpoint, a break of that area can only be characterized as bearish.

Freeport-McMoRan (FCX) continues to hold above its 50-day and 200-day simple moving average, but there's no denying the stock is jumping up and down on thin ice. A close under $33.83 and the 50-day simple moving average would be an obvious negative and would likely push me out of the stock.

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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