Brocade Bullish Engulfing Formed

Published on Monday, 26 July 2010 18:24 Written by Christian Paolinetti

New York, July 26th (TradersHuddle.com) - Shares of Brocade Communications Systems, Inc. (NASDAQ:BRCD) ended the trading session higher by $0.13 or 2.58% from its previous close. Brocade's price action formed what is considered to be a bullish engulfing candle that could very well signal continuation of trend or reversal on ongoing weakness.

Brocade Communications Systems, Inc. (NASDAQ:BRCD) provides switching solutions for storage area networks. Its family of SilkWorm switches enables a company to manage growth of its data storage requirements, improve the data transfer performance, and increase the size of its storage area networks.

Brocade's recent stock range has been formed by a trough where calculated support was defined at $4.91 and by a peak that established the resistance level at $5.28, which could be used by traders planning their trades.

Traders wanting to establish a position in Brocade or traders that are already holding the stock can use the bullish engulfing pattern to their advantage. The pattern provides a defined risk as it shows where the bears were able to push the stock down, before the bulls stepped in.

The bullish engulfing pattern is a leading indicator that provides an alert to the bulls that the trend will continue or that there is an immediate reversal to the short term weakness seen on the stock. Below an Engulfing Bullish Candle Illustration: