Rolta and Inverted Hammer

Stock : Rolta

CMP : Rs 326

Rolta Shows a Inverted Hammer pattern in weekly charts and here is a strategy about how to trade a Bullish

Inverted hammer. Also Still on Daily and Weekly Charts Rolta Continues to trade bullish above 20 period EMA

How to trade a Bullish Hammer

If you are a regular Swing Trader reader, then the inverted hammer should seem very familiar. However, you may not be able to put your finger on exactly why it looks so familiar.

If you examine the inverted hammer carefully, it hardly looks like a bullish candle. Prices opened low and then rallied strongly. By the close of trading, however, the stock has given back almost all of the day's gains. That leaves a small real body and a very large upper shadow. If anything, the candle looks bearish. The bulls could not sustain a rally, so the bears took the stock back toward its lows for the day.

So, why should this candle potentially set up an important reversal? My theory is that the inverted hammer is a signal that shorts are beginning to cover their positions.

Here is my reasoning. Since the inverted hammer can only occur after a sustained downtrend, the stock is in all probability already oversold. Therefore, the inverted hammer may signify that shorts are beginning to cover. In addition, traders who have held long positions in the security, most of whom are now showing large losses, are often quick to dump their shares by selling into strength. This will also serve to drive the stock back down.

With this candle, it is imperative to watch the next day's trading action. If the stock opens stronglyand remains strong during the day, then a key reversal is likely in progress.So If Rolta starts trading above 340 range then you can expect an immdiate bounce upto 374-385 levels in short term

Rolta and Inverted Hammer

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