Bullish Reversal Pattern - Covanta

Published on Friday, 14 October 2011 04:15 Written by TradersHuddle Staff

New York, October 14th (TradersHuddle.com) - Shares of Covanta Holding Corporation (NYSE:CVA) ended the trading session lower by $0.06 or -0.41% from its previous close. Covanta'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.

Covanta Holding Corporation (NYSE:CVA) has operations in waste disposal, energy services, and specialty insurance. The Company also owns and operates waste-to-energy and power generation projects. Covanta's waste-to-energy facilities convert municipal solid waste into renewable energy for communities primarily in the United States.

Covanta's stock has been trading in a well defined range with support at $13.25 and resistance at $14.59, this range is also being used by traders to plan their positions.

Traders wanting to establish a position in Covanta 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 Covanta, 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: