Trading Idea - Shanda Games A Doji Close

Published on Tuesday, 07 February 2012 04:40 Written by TradersHuddle Wire

New York, February 7th (TradersHuddle.com) - Shares of Shanda Games Limited (NASDAQ:GAME) closed the trading day lower by $0.02 or -0.51% from its previous close. Shanda Games' shares price action formed what is considered to be a doji close, where the open and close prices are very close to each other, mainly signaling an indecision between buyers and sellers.

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' current stock range is defined by a trough, which marks calculated support at $3.46 and by a peak that marked the resistance point at $4.02. These levels are closely watched by traders managing their positions.

Traders wanting to establish a position in Shanda Games or traders that are already holding the stock can use the doji close to their advantage, since the pattern present a short term pause in the stock's price action. This pause results in an entry point for traders depending of which way the stock resolves this short term indecision.

Doji are important candlesticks that provide information on their own and as components in a number of important patterns. Doji form when a security's open and close are virtually equal. The length of the upper and lower shadows can vary and the resulting candlestick looks like a cross, inverted cross or plus sign. Alone, doji are neutral patterns.

Any bullish or bearish bias is based on preceding price action and future confirmation. In the case of Shanda Games, given that the stock finished the session lower, bears should monitor the stock, as it could reverse if it manages to trade above today's intraday high. Below a Doji illustration: