Is this a Reversal Pattern for Xylem ?

Published on Tuesday, 05 June 2012 05:12 Written by TradersHuddle Wire

New York, June 5th (TradersHuddle.com) - Shares of Xylem Inc. (NYSE:XYL) ended the trading session higher by $0.03 or 0.12% from its previous close. Xylem's price action in the 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.

Xylem Inc. (NYSE:XYL) is a leading global water technology provider, enabling customers to transport, treat, test and efficiently use water in public utility, residential and commercial building services, industrial and agricultural settings. The company does business in more than 150 countries through a number of market-leading product brands, and its people bring broad applications expertise with a strong focus on finding local solutions to the most challenging water and wastewater problems around the world. Launched in 2011 from the spinoff of the water-related businesses of ITT Corporation, Xylem is headquartered in White Plains, N.Y.

Xylem's stock has been trading in a well defined range with calculated support at $27.11 and resistance at $29.03. This range can be used by traders to plan their next moves.

Traders wanting to establish a position in Xylem 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.

The Hammer is an important candlestick pattern, as it can 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 Xylem, 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: