Trade-Ideas LLC identified Brocade Communications Systems ( BRCD) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Brocade Communications Systems as such a stock due to the following factors:

  • BRCD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $87.2 million.
  • BRCD has traded 1.2 million shares today.
  • BRCD is trading at 2.39 times the normal volume for the stock at this time of day.
  • BRCD crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on BRCD:

Brocade Communications Systems, Inc. provides storage area networking (SAN) and Internet protocol (IP) networking solutions for businesses and organizations worldwide. It operates through three segments: SAN Products, IP Networking Products, and Global Services. The stock currently has a dividend yield of 1.9%. BRCD has a PE ratio of 11. Currently there are 2 analysts that rate Brocade Communications Systems a buy, 1 analyst rates it a sell, and 12 rate it a hold.

The average volume for Brocade Communications Systems has been 5.1 million shares per day over the past 30 days. Brocade Communications Systems has a market cap of $3.8 billion and is part of the technology sector and computer hardware industry. The stock has a beta of 0.60 and a short float of 1.6% with 0.74 days to cover. Shares are up 5.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Brocade Communications Systems as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels, impressive record of earnings per share growth and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 3.23, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Communications Equipment industry and the overall market, BROCADE COMMUNICATIONS SYS's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • BROCADE COMMUNICATIONS SYS has improved earnings per share by 15.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BROCADE COMMUNICATIONS SYS increased its bottom line by earning $0.79 versus $0.54 in the prior year. This year, the market expects an improvement in earnings ($1.07 versus $0.79).
  • Net operating cash flow has significantly increased by 979.57% to $112.20 million when compared to the same quarter last year. In addition, BROCADE COMMUNICATIONS SYS has also vastly surpassed the industry average cash flow growth rate of 39.69%.

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