How to Play the Building Momentum in Rowan Companies

Published on Wednesday, 11 July 2012 08:32 Written by TradersHuddle Wire

New York, July 11th (TradersHuddle.com) - Shares of Rowan Companies, Inc. (NYSE:RDC) closed the trading session at $32.78 with its price action in a very tight range, given that calculated support is set at $32.28 and the calculated resistance is set at $33.99.

Rowan Companies, Inc. (NYSE:RDC) provides contract drilling services. The Company also owns and operates a manufacturing division that produces equipment for the drilling, mining and timber industries.

Rowan's stock price action indicates that both sellers and buyers are materializing very close to each other. This signals an area where momentum is building, since the stock can resolve by breaking out of the developing tight range.

Traders wanting to establish a position should pay close attention to Rowan's price action, as any movement outside its predefined range of $32.28 and $33.99 could grasp the attention of momentum buyers that look for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support could spark above the average selling. A tiered approach could be the best way to start a position; enter into it while the stock is in the tight range, and then add to this position as it breaks and closes above resistance.