Brocade Communications Systems is a supplier of open Fibre Channel Fabric solutions that provide the intelligent backbone for Storage Area Networks. For the FY ended 10/28/00, revenues totalled $329M, up from $68.7M. Net income totalled $67.9M, up from $2.5M. Revenues reflect the evolution of the storage area networking market. Earnings also reflect increased gross margins and higher non-operating interest income.

December 9, 2000

We are all too well aware of the punishment that most technology shares have been through this year. As we enter into what we think will be a tradable rally in select sectors within the NASDAQ, stock picking becomes increasingly important. Two areas of the technology field that have garnered interest from bargain hunters lately have been fiber optics and storage solution companies. BRCD is a leader within the latter group. BRCD provides advanced switching products for Storage Area Networks (SANs). Adding fuel to the potential bonfire is the fact that BRCD announced a 2:1 split at the end of November. The split will be paid to shareholders on December 21st. Clearly, we could have a split run on our hands. This is an extremely volatile stock so, lighter positions are recommended. Nevertheless, we are encouraged by the fact that the stock managed to climb above its 50-DMA of $218.09 on Friday. The potential for increased volatility next week is very real. If the markets are slammed on the open due to Gore's Florida Supreme Court victory, look to pick up BRCD if it can hold support just above $210, which is the low of the day on Friday’s trading session. The longer-term technical indicators for the stock look good. The MACD turned positive last week after suffering a severe decline. The OBV and Money Flow are both resuming their upward trends. The RSI is indicating upside potential before the stock becomes overbought. If our stop is not executed, we will exit this position just before the split becomes payable on December 21st.

Picked on December 10th @ $219.75
Change since picked +0.00
Stop Loss @ $210.00

December 14, 2000

It appears the pundits were right with their predictions that the market would sell off following a Gore concession. The resulting drop pushed Brocade below support and we were consequently stopped. Just a reminder, Brocade splits 2:1 on December 21st. We may still try and capture a split run if the stock can stabilize.

Picked on December 10th @ $219.75
Profit/Loss -4.75 (2%) (Stopped Wednesday @ $215.00)
Best Profit +11.25 (5%)

December 12, 2000

Trading technology stocks is a passion for many market participants. The attraction is the volatility. Traders are trying to pick a technology sector that is likely to come back strong. The early returns suggest that traders believe in companies involved in data storage solutions. Brocade is a major player in this group. Brocade is also in the middle of a split run. A 2:1 split will be paid to shareholders on December 21. We were very encouraged by yesterday's move above $230.00, but NASDAQ weakness dragged the stock back down. Please note that we have raised our stop to $215.00. The 50-DMA of $217.75 appears to be the pivot point for short term swings. The MACD has exploded from oversold levels but may be a bit ahead of itself. On the plus side, the strong rally has not resulted in the RSI triggering an overbought signal. OBV and Money Flow have both made nice recoveries but have run into resistance. If we can avoid being stopped, look for BRCD to test its high of $267.44 if it can take out resistance at $231.13. If we are not stopped, we will exit this position before the split.

Picked on December 10th @ $219.75
Change since picked -2.00
Stop Loss @ $215.00