Broadcom Drops 3.8% as Technical Breakdown Signals Further Downside Risk

Broadcom (AVGO) closed at $346.17, declining 3.84% with elevated volume, extending its two-day loss to 4.92%. This recent weakness follows a failed test of the $359-$365 resistance zone, warranting a multi-indicator assessment of the technical landscape.
Candlestick Theory
The September 10th bullish engulfing pattern (low: $350.55, high: $372.97) signaled strong upward momentum. However, the subsequent two bearish marubozu candles (Sept 16th and 17th) closing near session lows indicate persistent selling pressure. The $346 close breaches the prior swing low support near $350, turning this level into immediate resistance. Significant structural support now rests near $329 (late August consolidation zone).
Moving Average Theory
The 50-day MA (approx. $350 based on recent closes) was violated on September 17th, suggesting near-term trend deterioration. However, the 100-day MA ($320) and 200-day MA ($270) maintain upward slopes, preserving the longer-term bullish structure. The convergence of the 50-day and 100-day MAs near $340-$345 presents a critical support confluence – sustained trading below this zone would indicate strengthening bearish momentum.
MACD & KDJ Indicators
MACD (12,26,9) shows a bearish crossover emerging below the signal line and centerline, confirming weakening momentum. KDJ (9,3,3) exhibits a decisive downswing, with the %K line (33) crossing below %D (51) from overbought territory (>80 on Sept 12th). Both oscillators align in signaling fading bullish energy. The KDJ bearish crossover occurring near the 50-level suggests the potential for further downside before oversold conditions develop.
Bollinger Bands
The bands contracted significantly through early September, culminating in the September 10th expansion breakout. Prices have now reverted below the 20-period moving average (mid-band) near $350 and are testing the lower band ($339). This rejection from the upper band and contraction-to-expansion sequence implies elevated volatility and a directional bias toward the lower band. Continued closes below the mid-band reinforce bearish near-term control.
Volume-Price Relationship
The September 10th rally occurred on the year's highest volume (51.1M shares), validating bullish conviction. Conversely, the recent two-day decline saw volume expand markedly (37.7M shares on Sept 17th), confirming distribution. This volume profile during the pullback suggests institutional participation in the selling, increasing the probability of further downside to absorb this supply. Declines on rising volume lack sustainability warnings seen in low-volume retracements.
Relative Strength Index (RSI)
The 14-period RSI has retreated from near-overbought levels (68 on Sept 11th) to 40. While this reflects moderated momentum, it avoids oversold territory (<30), indicating room for further downside before a potential mean-reversion bounce occurs. The current RSI trajectory lacks positive divergence against the recent price lows, failing to signal imminent reversal strength.
Fibonacci Retracement
Using the swing low of $161.67 (September 18, 2024) and high of $359.93 (September 17, 2025):
- The 23.6% retracement sits at $325
- The 38.2% retracement aligns with $290
- The 50% retracement rests at $260
The recent selloff stalled near the 23.6% level ($329-$331 area) in late August. A decisive break below $325 would target the next significant support confluence near the 38.2% retracement ($290) coinciding with the 100-day moving average.
Confluence and Divergence Assessment
Strong confluence exists at the $340-$350 zone, merging the 50-day MA, September swing lows, and Bollinger mid-band. The decisive breakdown below this region on expanding volume is technically significant, reinforced by bearish MACD/KDJ crossovers. The primary divergence lies within RSI behavior: While price made a marginal higher high on September 15th ($365.69 vs. Sept 12th $364.39), RSI formed a lower high (69 vs. 73), foreshadowing the subsequent weakness. The current technical structure favors near-term bearish continuation toward the $325 Fibonacci level, with a sustained hold above $340 needed to invalidate the immediate downward trajectory.