Trading Idea - Guess? A Hammer Formed

Published on Thursday, 19 January 2012 05:00 Written by TradersHuddle Staff

New York, January 19th (TradersHuddle.com) - Shares of Guess?, Inc. (NYSE:GES) ended the trading session lower by $0.49 or -1.68% from its previous close. Guess' 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.

Guess?, Inc. (NYSE:GES) designs, markets, distributes, and licenses a collection of casual apparel, accessories, and related consumer products. The company provides full collections of denim and cotton clothing.

Guess' stock has been trading in a well defined range with support at $28.78 and resistance at $31.00, this range is also being used by traders to plan their positions.

Traders wanting to establish a position in Guess? 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 Guess?, 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: