Exela Technologies Skyrockets As Demand Outweighs Supply: What To Watch

Zinger Key Points
  • Exela was working to print a massive bullish engulfing candlestick on Tuesday.
  • If the stock fails to trade higher, it may consolidate under the 50-day SMA with an inside bar.

Exela Technologies, Inc XELA was skyrocketing 130% higher on Tuesday, rebounding massively after a 1-for-200 reverse stock split, which came into effect before the market opened Monday and caused the stock to drop almost 40%.

Now, with a float of just about 6.4 million shares, demand is outweighing supply, causing Exela to soar with bullish momentum.

The price action saw Exela looking to print a massive bullish engulfing candlestick. A bullish engulfing candlestick pattern forms when a small red candlestick is followed by a large green candlestick that has a body that completely engulfs the body of the previous day’s candlestick.

For the pattern to be valid, the engulfing candlestick must close above the highest price of the previous day’s candlestick and the pattern is more powerful if it is preceded by a number of red candles.

A bullish engulfing candlestick pattern is often found at the bottom of a downtrend and can be a powerful reversal signal that the stock will begin to trade in an uptrend.

Candlestick patterns can be used to indicate the future price direction of a stock. Candlestick patterns are especially useful for technical traders when they are combined with other indicators such as larger patterns, trading volume, relative strength index (RSI) and divergences between RSI and price action.

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The Exela Chart: In addition to printing a bullish engulfing candlestick, Exela negated its downtrend on Tuesday by forming a higher high above the most recent lower high, which was printed at the $6.60 mark on May 9. To confirm a new uptrend, the stock will eventually need to retrace to print a higher low above Monday’s low-of-day at the $2.62 mark.

  • If Exela fails to trade higher again on Wednesday, the second most likely scenario is that the stock trades sideways to form an inside bar. If that happens, it will lean bullish for continuation over the next few trading days.
  • Despite the huge upswing Tuesday, Exela’s relative strength index (RSI) hasn’t reached overbought territory. With the RSI measuring in at about 51%, Exela has room to trade higher still.
  • Exela rejected the 50-day simple moving average (SMA) on Tuesday, but was attempting to hold above the eight-day and 21-day exponential moving averages. Bullish traders will want to see the stock eventually regain the 50-day SMA for more confidence going forward, although the stock may need to consolidate under the level for a period of time before gaining the strength to break bullishly above it.
  • Exela has resistance above at $9.92 and $11.82 and support below at $6.48 and $3.60.

Read Next: Apple Consolidates As The Stock Market Readies For A Big Move In One Direction: The Bull, Bear Case

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