Pepco Holdings - Bottom Fishing

Published on Friday, 03 February 2012 04:42 Written by Christian Paolinetti

New York, February 3rd (TradersHuddle.com) - Shares of Pepco Holdings, Inc. (NYSE:POM) ended the trading session higher by $0.02 or 0.08% from its previous close. Pepco'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.

Pepco Holdings, Inc. (NYSE:POM) is a diversified energy company. The Company primarily distributes, transmits, and supplies electricity and supplies natural gas to customers in New Jersey, Delaware, Maryland, and the District of Columbia.

Pepco's stock has been trading in a well defined range with support at $19.00 and resistance at $20.64, this range is also being used by traders to plan their positions.

Traders wanting to establish a position in Pepco Holdings 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 Pepco Holdings, 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: