Is Peabody Reversing?

Published on Friday, 09 July 2010 02:36 Written by Christopher Lynn

New York, July 9th (TradersHuddle.com) - Shares of Peabody Energy Corp (NYSE:BTU) closed the trading day higher by $0.76 or 1.81% from its previous close. Peabody's shares price action formed what is considered to be a doji close, where the open and close prices are very close to each other, mainly signaling an indecision between buyers and sellers.

Peabody Energy Corp. (NYSE:BTU) principal activities are mining, preparation and sale of steam coal, sold primarily to electric utilities and metallurgical coal, sold to steel and coke producers. The company?s other energy related businesses include the development of mine-mouth coal-fueled generating plants, the management of its vast coal reserves and real estate holdings, coalbed methane production and transportation services.

Peabody's current stock range is defined by a trough, which marks calculated support at $38.08 and by a peak that marked the resistance point at $44.33. These levels are closely watched by traders managing their positions.

Traders wanting to establish a position in Peabody or traders that are already holding the stock can use the doji close to their advantage, since the pattern present a short term pause in the stock's price action. This pause results in an entry point for traders depending of which way the stock resolves this short term indecision.

Doji are important candlesticks that provide information on their own and as components in a number of important patterns. Doji form when a security's open and close are virtually equal. The length of the upper and lower shadows can vary and the resulting candlestick looks like a cross, inverted cross or plus sign. Alone, doji are neutral patterns.

Any bullish or bearish bias is based on preceding price action and future confirmation. In the case of Peabody, given that the stock finished the session higher, bulls should monitor their positions for confirmation that stock will continue higher by taking today's intraday high. Below a Doji illustration: