Stock of the day: BASF

In today’s analysis we turn our attention to BASF, which we previously mentioned in April. Back then, the situation didn’t look really promising and we were rather bearish. This is how we concluded the previous piece:

“What you can see on the weekly chart is a long-term failed inverse head and shoulders pattern (blue). The price failed to break the neckline (black) and instead, broke the red line connecting the bottom of the head and the right shoulder. That line could also be considered a mid-term up trendline. That breakout and failed inverse head and shoulders formation, is a strong sell for position investors, which makes our view on BASF negative.”

It was a spot-on conclusion, because since then the price has almost constantly gone lower. This week, BASF managed to reach a new, long-term low.

So is the situation still bearish? Not quite. We’re actually here because we can see a possible reversal pattern, which can give us a promising buy signal.

BASF is on lows from 2020 (orange) and on this support, the price is currently creating a hammer candle on the weekly chart (green). Such a pattern in such a place can be the start of a new bullish trend or at least a correction.

One thing worth considering is that we’re only at Wednesday so the weekly candle isn’t finished yet. If one trades weekly candles, it would be nice to wait for this weekly candle to close. If traders manage to pull this hammer off, we’ll receive an interesting buy signal, with a promising risk to reward ratio.