Trader’s Narrative

Network Appliance gapped down and broke below $30.30 where it had found support twice previously (on daily chart). The morning volume was surprisingly muted for such a technical deterioration:

The first candle closed down down but left a long lower tail which was a bit ambivalent. The second candle was decidedly more negative, closing at its low and the low of the opening range. The next three candles were each successively narrower in range.

The best entry short was just below the 5th candle (red circle). Price expanded downward again after this brief contraction and reached the Fibonacci extension target.

The downtrend continued, no doubt aided by the general market weakness and the fact that Network Appliance is in the internet/tech sector. Again I saw the ultimate low being put in when volume spiked and when a beautiful hammer was printed with a very long lower tail.

Subsequent volume exceeded the hammer’s volume but I think there’s something to be said for this pattern which seems to signal the end of intraday selling pressure.