Trading Idea - Axis Capital A Hammer Formed

Published on Friday, 21 September 2012 04:51 Written by TradersHuddle Wire

New York, September 21st (TradersHuddle.com) - Shares of Axis Capital Holdings Limited (NYSE:AXS) ended the trading session lower by $0.15 or -0.42% from its previous close. Axis Capital'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.

Axis Capital Holdings Limited (NYSE:AXS) provides specialty lines and treaty reinsurance on a global basis. Specialty lines primarily includes onshore and offshore energy, aviation and aerospace, commercial property and marine. Treaty reinsurance covers catastrophe risks such as property, Workers Compensation, professional liability, casualty, and marine and aviation.

Axis Capital's stock has been trading in a well defined range with calculated support at $32.03 and resistance at $36.45. This range can be used by traders to plan their next moves.

Traders wanting to establish a position in Axis Capital 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 Axis Capital, 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: