CommVault Systems, Inc. (NasdaqGS: CVLT)

CommVault Systems, Inc. is a provider of data and information management software applications and related services. The company develops, markets and sells a suite of software applications and services, primarily in North America, Europe, Australia and Asia, which provides its customers with data protection; data migration and archiving; snapshot management and replication of data; integrated source and target reduplication; e-discovery and compliance solutions; protection, recovery and discovery of data in virtual server environments; enterprise-wide search capabilities, and management and operational reports, remote services and troubleshooting tools. The company also provides its customers with a range of professional and customer support services. CommVault develops, markets and sells data and information management software applications under the Simpana brand.

To review CommVault’s stock, please take a look at the 1-year chart of FL (CommVault System, Inc.) below with my added notations:

After breaking to a new high in February, CVLT has been consolidating within a sideways, Rectangle pattern over the last (4) months. Rectangle patterns form when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. For CVLT, the Rectangle pattern has formed a $55 resistance (red) and a $50 support area (black).  Last week the stock broke its $50 support and should be moving lower overall from here.

The Tale of the Tape: CVLT formed a Rectangle pattern and broke that pattern’s support. A short position should be entered on a rally back up to $50 with a stop placed above $50. A break back above $50 would negate the forecast for a move lower.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT