Saks - Bottom Fishing

Published on Thursday, 26 January 2012 04:57 Written by Christian Paolinetti

New York, January 26th (TradersHuddle.com) - Shares of Saks, Inc. (NYSE:SKS) ended the trading session lower by $0.05 or -0.5% from its previous close. Saks' 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.

Saks, Inc. (NYSE:SKS) operates department stores in the United States under Saks Fifth Avenue and Saks Fifth Avenue OFF 5TH (OFF 5th) brand names. The stores offer a wide variety of branded and private label merchandise including luxury apparel, shoes, accessories, cosmetics, and decorative home furnishings.

Saks' stock has been trading in a well defined range with support at $8.92 and resistance at $10.03, this range is also being used by traders to plan their positions.

Traders wanting to establish a position in Saks 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 Saks, 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: