Let’s study the weakest type of support: the resting day pattern.
Resting day patterns are intraday, swing, velocity, and momentum trader’s ideal and lowest risk entry for fast moving stocks propelled by overall market action and their own internal company driven price momentum.
HAIN has been moving up this week on above average volume but not heavy volume. It has moved up a day, rested, then moved up again. On this chart, it is preparing to challenge the resistance high of mid February. A monthly high resistance is not much of a challenge for stocks running up with momentum.
These are the kinds of patterns that can stump new, novice, and intermediate level traders. Will the stock move up again or will it reverse and have profit taking? At the moment, many of you can’t tell what is about to happen.
The resting day support is the weakest support level. If the stock starts coming down, it will need the support from the prior sideways pattern that formed before to help hold it up.
The question is: will this stock move with momentum and blast through the February highs or will it stall, and encounter profit taking. The answer is more dependent upon which market participants are in control of price. When you know who is driving price, you can better anticipate the stocks next move.
In this instance, smaller lots are in control at the moment. Volume patterns, TTQA and TTVA tell us this.
There is a lack of follow through with more buyers, and there is a lack of profit taking resulting in the resting day pattern..This is a very small candle with a small body that begins and ends the day near the high of the previous day.
If buyers were moving in steadily every day, the resting day pattern would not form.
FYI: a resting day pattern is different than a doji from the old style Japanese Candlestick books. It may look the same but where it forms, how and why it forms and what it means for next day price action is quite different in the western automated marketplace. One thing you must learn to do is read candlesticks based on what the modern automated marketplace means and not on ancient Japan. Japan was a rice commodity market and a totally different mindset for investors and traders.
We know that smaller lots tend to buy either with “At Market” orders or simple “Limit Orders” that fills a buy order at a certain price or lower. In this case the predominate order of the day is an at market. We also know that given the indicators and patterns that this is probably small funds buying on the “dip” which has happened quite a bit in the past week. A stock moved down due to panic selling and not on its own value so these stocks moved right back up as the market recovered.
This is one of those situations where small funds are moving in during what they perceive as a dip. They may also be buying prior to an earnings release, which is a very popular strategy. If so, this stock could move up with velocity and move right through the February highs with ease.
Chart 1
So, will the stock move up or will it have profit taking on Friday March 25th?
All indicators point to more upside. The shift from red TTQA to center line often occurs prior to a sudden big move up.
TTVA is up as are the other indicators. The pattern suggests that pre-buying before a news announcement and buying on a dip has occurred. It would not be surprising to see heavy buying on Friday with profit taking during the day. If high frequency traders step in the stock could move rapidly on very high volume.
Check it out and see what HAIN did on your MetaStock Charting Software. These are pretty common patterns right now but require strong SPRS skills, plenty of experience, and a solid process for trading them. This is not a recommendation to trade HAIN, but an example of a stock with momentum potential.
Chart 2 
Chart 3
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As always:
Trade wisely,
Martha Stokes, C.M.T.
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
http://technitrader.com
MetaStock Partner
(c)2011 Decisions Unlimited, Inc.
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