Community Health - Traders Looking for a Bottom

Published on Sunday, 29 August 2010 23:57 Written by Christopher Lynn

New York, August 29th (TradersHuddle.com) - Shares of Community Health Systems Inc. (NYSE:CYH) ended the trading session higher by $0.19 or 0.71% from its previous close. Community Health's price action in today's session formed what is considered to be a Hammer, where bears drove prices lower intraday. However, the strong finish indicates that bulls regained control forming a trend reversal.

Community Health Systems Inc. (NYSE:CYH) owns, leases, and operates hospitals in multiple states. The Hospitals services include emergency room services, general surgery, critical care, internal medicine, obstetrics and diagnostic services. Community Health also owns interests in physicians, physician practices, imaging centers, home health agencies and ambulatory surgery centers.

Community Health's stock has been trading in a well defined range with support at $27.02 and resistance at $34.11, this range is also being used by traders to plan their positions.

Traders wanting to establish a position in Community Health or traders that are already holding the stock can use the hammer formation to their advantage, since the pattern signal a potential bullish trend reversal.

Hammers are important candlesticks as they mark bottoms and support levels. Further buying pressure, and preferably on expanding volume, is needed before acting, as heavy volume will serve to confirm the validity of the reversal.

In the case of Community Health, traders who want to add to their positions or start a new position, need to watch for confirmation of the reversal. Below a Hammer illustration: