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Superior Energy SVCS (SPN) - Buy on a Dip

Last Friday, we saw a jump in price and volume for SPN.

Trade-Ideas LLC identified Superior Energy Services ( SPN) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Superior Energy Services as such a stock due to the following factors:

  • SPN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $71.5 million.
  • SPN has traded 287,773 shares today.
  • SPN is trading at 3.59 times the normal volume for the stock at this time of day.
  • SPN is trading at a new high 12.11% above yesterday's close.


'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize.

(Full Article at thestreet.com

Now, looking at the technical picture, it does indeed look like a bullish reversal or at least a significant bullish correction is developing in SPN:

SPN Daily Chart 5/2

(click to enlarge)

As we can see in the daily chart, price has broken above a falling trendline and the cluster of 200-, 100-, and 50-day simple moving averages. Furthermore, the RSI has pushed above 70, which indicates initiation of bullish momentum. 

Now in 2015, we had a similar run up, which retreated from just above 26. Will this repeat in 2016? It is May again and price has run up to a key pivot area around 17 this time. 

I think for the sake of reward to risk, we should wait for a pullback towards the 14.00 area before considering a buy. I think there is upside potential towards at least 20.00. I think if price falls below 12.00 the bullish outlook should be scrapped. Therefore, the reward to risk ratio could be decent if a long position is planned around 14.00. 

Another reason to wait is because we can anticipate some resistance here around 17.00, Not only is this a pivot area, RSI and price is now showing a bearish divergence. I would wait for the RSI to pull back towards 40. If it can turn back up instead of breaking below 40, we should favor the bullish outlook.