Risk Models (RSKD) Hammer Chart Pattern: Time to Hunt the Bottom?
price direction for Risky (RSKD) has been bearish lately and the stock has lost 7.6% over the past week. However, the hammer chart pattern formation in the recent trading session suggests that the stock may see a trend reversal soon, as the bulls may have gained significant control over the price to help it find support.
While the formation of a hammer pattern is a technical sign of an approaching bottom with selling pressure likely to exhaust, the growing optimism among Wall Street analysts about the future earnings of this fraud prevention services provider is a strong fundamental factor boosting the outlook. trend reversal of the stock.
What is a hammer chart and how to trade it?
This is a common price pattern in candlestick charts. The small difference between the opening and closing prices forms a small candle body, and the higher difference between the day’s low and the opening or closing price forms a long lower wick (or vertical line). The lower wick is at least twice as long as the real body, and the candle resembles a “hammer”.
In simple terms, during a downtrend, with bears in absolute control, the stock usually opens lower compared to the previous day’s close, and closes lower again. On the day when the Hammer pattern is formed, while maintaining the downward trend, the stock records a new low. However, after eventually finding support at the intraday low, some buying interest emerged, pushing the stock higher to close the session near or slightly above its opening price.
When it occurs at the bottom of a downtrend, this pattern indicates that the bears may have lost control of the price. The success of the bulls in preventing the price from falling further indicates a possible reversal in the trend.
Hammer candles can occur in any time frame – such as 1-minute, daily or weekly – and are used by short-term as well as long-term investors.
Like every technical indicator, the hammer chart pattern has its limitations. In particular, since the hammer’s strength depends on its position on the chart, it should always be used in conjunction with other bullish indicators.
Here’s what increases the odds of converting to RSKD
There has been an upward trend in earnings estimate revisions for RSKD recently, which can certainly be seen as a bullish sign on the fundamental side. This is because a positive trend in earnings estimate revisions usually translates to higher prices in the near term.
Over the past 30 days, the estimate for earnings per share for the current year has increased by 8.1%. What that means is that the sell-side analysts who cover RSKD are largely in agreement that the company will report better earnings than they previously expected.
If that wasn’t enough, you should note that RSKD currently has a Zacks rating of #2 (Buy), which means it’s in the top 20% of the more than 4,000 stocks we’re ranking based on trends in earnings estimate revisions and EPS surprises. . Stocks with a Zacks rating of No. 1 or 2 are usually outperforming the market. You can see the full list of Zacks Rank #1 (Strong Buy) stocks today here >>>>
Furthermore, the Zacks rating of 2 for Riskified is a more conclusive indicator of a potential trend reversal, as the Zacks Rank has proven to be an excellent timing indicator that helps investors pinpoint precisely when a company’s prospects begin to improve.
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.