Rockwood Holdings - Hammer Candlestick Formed

Published on Monday, 12 December 2011 18:45 Written by Danny Miller

New York, December 12th (TradersHuddle.com) - Shares of Rockwood Holdings Inc. (NYSE:ROC) ended the trading session lower by $0.99 or -2.47% from its previous close. Rockwood'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.

Rockwood Holdings Inc. (NYSE:ROC) develops, manufactures, and markets of inorganic chemicals and engineered materials. Its products include, lithium compounds, fiber anatase titanium dioxide, color pigments and ceramic-on-ceramic components used in hip joint and prostheses systems.

Rockwood's stock has been trading in a well defined range with support at $38.12 and resistance at $45.68, this range is also being used by traders to plan their positions.

Traders wanting to establish a position in Rockwood Holdings 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 Rockwood Holdings, 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: