Rackspace - Traders Looking for a Bottom

Published on Tuesday, 27 December 2011 04:03 Written by Christian Paolinetti

New York, December 27th (TradersHuddle.com) - Shares of Rackspace Hosting, Inc. (NYSE:RAX) ended the trading session higher by $0.12 or 0.28% from its previous close. Rackspace'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.

Rackspace Hosting, Inc. (NYSE:RAX) operates in the hosting and cloud computing industry. It provides managing Web-based IT systems for small and medium-sized businesses, as well as large enterprises worldwide. Its service suite includes dedicated hosting comprising managed hosting service that manages data center, network, hardware devices, and operating system software; private cloud service, which enables large enterprises to virtualize their IT environments.

Rackspace's stock has been trading in a well defined range with support at $39.04 and resistance at $45.45, this range is also being used by traders to plan their positions.

Traders wanting to establish a position in Rackspace 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 Rackspace, 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: