Brocade Broke Support

Published on Friday, 16 December 2011 08:32 Written by Christopher Lynn

New York, December 16th (TradersHuddle.com) - Shares of Brocade Communications Systems, Inc. (NASDAQ:BRCD) closed the trading session at $5.23 below calculated support at $5.31 breaking current long setups, raising concerns by the bulls, as this move might give the bears the upper hand.

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 stock was trading in a well defined range with support at $5.31 and resistance at $5.66; given that this range was broken traders will be closely monitoring the stock's price action for clues of direction.

From a technical perspective it can be expected that previous support becomes resistance, as the new range gets defined, however, given that Brocade's stock is still near the broken support, traders will be focusing on $5.31 to see if the stock can bounce back and return to its previous range.

Traders wanting to establish a short position in Brocade can do so if the stock breaks the intraday low, or if the stock bounces back and selling materializes again at previous support of $5.31. For traders wanting to establish a long position, wait for price action to take the stock back to calculated support, which will provide a best entry point to build the position.