Shanda Games - Bottom Fishing

Published on Wednesday, 21 December 2011 04:48 Written by Danny Miller

New York, December 21st (TradersHuddle.com) - Shares of Shanda Games Limited (NASDAQ:GAME) ended the trading session higher by $0.06 or 1.41% from its previous close. Shanda Games' 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.

Shanda Games Limited (NASDAQ:GAME) is an online game developer, operator and publisher in China. Shanda Games offers a diversified game portfolio, which includes some of the most popular massively multiplayer online role-playing games and advanced casual games in China, targeting a large and diverse community of users. Shanda Games manages and operates online games that are developed in-house, co-developed with world-leading game developers, acquired through investments or licensed from third parties.

Shanda Games' stock has been trading in a well defined range with support at $3.93 and resistance at $4.61, this range is also being used by traders to plan their positions.

Traders wanting to establish a position in Shanda Games 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 Shanda Games, 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: