BorgWarner - Bottom Fishing

Published on Thursday, 09 September 2010 01:24 Written by Christopher Lynn

New York, September 9th (TradersHuddle.com) - Shares of BorgWarner, Inc. (NYSE:BWA) ended the trading session lower by $1.02 or -2.14% from its previous close. BorgWarner'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.

BorgWarner, Inc. (NYSE:BWA) supplies engineered systems and components, primarily for automotive powertrain applications. Its products are manufactured and sold worldwide, primarily to original equipment manufacturers of passenger cars, sport utility vehicles, and light trucks. BorgWarner operates manufacturing facilities in North America, Europe, and Asia.

BorgWarner's stock has been trading in a well defined range with support at $42.18 and resistance at $49.035, this range is also being used by traders to plan their positions.

Traders wanting to establish a position in BorgWarner 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 BorgWarner, 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: