Trading Idea - Disney A Hammer Formed

Published on Tuesday, 22 January 2013 04:36 Written by TradersHuddle Wire

New York, January 22nd (TradersHuddle.com) - Shares of Walt Disney Co. (NYSE:DIS) ended the trading session lower by $0.07 or -0.13% from its previous close. Disney'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.

The Walt Disney Company (NYSE:DIS), the largest media company in the world, conducts operations in media networks, studio entertainment, theme parks and resorts, consumer products, and Internet and direct marketing. The Company produces motion pictures, television programs, and musical recordings, as well as publishes books and magazines. Disney also operates ABC radio and television, cable channels and theme parks around the world. Disney owns the most watch and valuable sports network in cable, ESPN. The entretainment company was founded by Mr. Walt Disney in 1923 and its based in Burbank, CA.

Disney's stock has been trading in a well defined range with calculated support at $46.96 and resistance at $52.70. This range can be used by traders to plan their next moves.

Traders wanting to establish a position in Disney 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 Disney, 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: