Brocade(BRCD): Bullish On Two Levels

Posted by barkand on June 6, 2011 under Classic chart patterns | Be the First to Comment

The last two days of trading in Brocade Communications (BRCD) has given us an unusual chart. The shares opened and closed at virtually the same places both days. This “railroad track” effect is usually a continuation pattern. Prices should travel in the direction of the close. And these two trading sessions were actually a gap up after completing a cup-and-handle pattern, so we expect prices to go higher. It is impressive, considering the weakness in the market overall. However, one negative would be the rather long upper shadows, if we were looking at a candlestick chart.

If we take a step back and look at a long-term chart, we see that the recent cup-and-handle is really part of a larger cupping pattern which started in the autumn of 2009. On this chart, we might expect BRCD to meet with some resistance between $8 and $9. Still, the shares are in the clear for a 15-20% gain from here over the next several months.