Trading Idea - Momentum Building in Sanofi-Aventis

Published on Wednesday, 01 February 2012 09:16 Written by Danny Miller

New York, February 1st (TradersHuddle.com) - Shares of Sanofi-Aventis (NYSE:SNY) closed the trading session at $37.13 placing the price action in a very tight range, given that calculated support is set at $35.09 and the calculated resistance based on an algorithm of peaks and troughs is set at $37.15

Sanofi-Aventis (NYSE:SNY) is a global pharmaceutical company that researches, develops and manufactures prescription pharmaceuticals and vaccines. The Company develops cardiovascular, thrombosis, metabolic disorder, central nervous system, internal medicine and oncology drugs, and vaccines.

Sanofi-Aventis' stock price action indicates that both sellers and buyers are materializing very close to each other, which is indicative to a momentum building area, as the stock can resolve by breaking out of the tight range that developed.

Traders wanting to establish a position should place close attention to Sanofi-Aventis' price action, as any movement outside its predefined range of $35.09 and $37.15 could grab the attention of momentum buyers, looking for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support at $35.09 could spark above average selling. A tiered approach can be a good way to approach starting a position in Sanofi-Aventis', by establishing a starter position while the stock is in the tight range, and then adding to the position as it breaks and closes above resistance.