Is this a Reversal Pattern for Cardinal Health ?

Published on Monday, 30 August 2010 00:09 Written by TradersHuddle Staff

New York, August 30th (TradersHuddle.com) - Shares of Cardinal Health, Inc. (NYSE:CAH) ended the trading session higher by $0.19 or 0.62% from its previous close. Cardinal 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.

Cardinal Health, Inc. (NYSE:CAH) provides products and services to healthcare providers and manufacturers. Its services include pharmaceutical distribution, health-care product manufacturing, distribution and consulting services, drug delivery systems development, pharmaceutical packaging, automated dispensing systems manufacturing, and retail pharmacy franchising.

Cardinal Health's stock has been trading in a well defined range with support at $29.81 and resistance at $33.51, this range is also being used by traders to plan their positions.

Traders wanting to establish a position in Cardinal 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 Cardinal 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: