Is this a Reversal Pattern for iRobot ?

Published on Thursday, 15 December 2011 18:12 Written by TradersHuddle Staff

New York, December 15th (TradersHuddle.com) - Shares of iRobot Corp. (NASDAQ:IRBT) ended the trading session higher by $0.57 or 1.91% from its previous close. iRobot'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.

iRobot Corp. (NASDAQ:IRBT) designs and builds robots that make a difference. The company manufactures robots that vacuum and wash floors, and perform battlefield reconnaissance and bomb disposal among other uses. The Company markets its products to consumers through retailers, and to the United States military and other government agencies worldwide.

iRobot's stock has been trading in a well defined range with support at $29.50 and resistance at $33.34, this range is also being used by traders to plan their positions.

Traders wanting to establish a position in iRobot 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 iRobot, 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: