Broadcom Plunges 5% Amid Bearish Technical Breakdown

Broadcom (AVGO) experienced significant selling pressure in the latest session, declining 5.00% to close at 246.93. This marks the second consecutive down day, bringing the two-day loss to 5.42%, with elevated volume of 41.0 million shares signaling strong bearish conviction. The current technical posture suggests a potential shift in momentum, as detailed in the following multifaceted analysis.
Candlestick Theory
The recent price action reveals a bearish engulfing pattern formed over the last two sessions. The June 5 candle (high: 264.89, low: 259.06, close: 259.93) showed indecision near all-time highs, followed by a decisive down candle on June 6 (high: 255.32, low: 246.13, close: 246.93) that engulfed the prior three sessions. This pattern confirms resistance near 265, establishing it as a critical technical ceiling. Immediate support lies at the June 6 low of 246.13, with stronger historical support at 240–242 (tested multiple times in late May). A close below 245 may trigger accelerated selling toward 232–235.
Moving Average Theory
Price has breached critical moving averages, closing below the 50-day SMA (approximately 250) and testing the 100-day SMA (approximately 244). The 200-day SMA near 197 remains ascending, confirming the longer-term uptrend. However, the short-term trend has deteriorated with the 50-day SMA flattening after crossing below the 100-day SMA last week—a bearish crossover known as the "death cross." Sustained trade below the 100-day SMA would signal further downside vulnerability toward the 200-day SMA. The convergence of these averages near 240–250 creates a high-interest technical zone.
MACD & KDJ Indicators
The MACD (12,26,9) shows a bearish trajectory, with the MACD line crossing below the signal line while both remain in negative territory. Histogram bars are expanding downward, confirming building bearish momentum. Concurrently, the KDJ oscillator (14,3,3) registers an oversold reading with K-line at 18 and D-line at 24, though both continue trending downward without bullish divergence. This alignment suggests downward momentum may persist despite oversold conditions. Traders should monitor for potential bullish crossovers in KDJ or MACD histogram contraction as reversal precursors.
Bollinger Bands
Price closed near the lower Bollinger Band (20-day, 2σ) at approximately 243, while the bands expanded significantly—volatility surging 28% over two sessions. This expansion during a downside move suggests continuation potential. The close below the middle band (20-SMA near 253) confirms the short-term downtrend. Historical parallels show similar band expansions in April and January preceded extended moves; therefore, a recovery above the middle band is needed to neutralize bearish pressure. The lower band near 243 now serves as immediate support.
Volume-Price Relationship
The bearish move was validated by elevated volume. June 6 volume (41.0 million shares) exceeded the 30-day average by 32% and marked the second-highest volume since April. Down days have consistently shown higher volume than up days over the past month, confirming distribution. Notably, volume surged during the breakdown below 255—a level that had supported prices in early June. This volume signature suggests institutional selling, increasing the probability of further downside absent a high-volume reversal.
Relative Strength Index (RSI)
The 14-day RSI plunged to 29, entering oversold territory for the first time since January. While this often precedes short-term bounces, the indicator lacks bullish divergence as new lows confirm RSI weakness. The slope of the RSI decline (from 58 to 29 in five sessions) signals extreme momentum loss. Historical oversold RSI readings in Broadcom have coincided with rebounds from the 100-day SMA, making RSI’s current position a warning sign but not an immediate buy signal without price confirmation.
Fibonacci Retracement
Drawing Fib levels from the March low (136.99) to the June 5 high (264.89), key retracement zones emerge. The 23.6% level (225.5) aligns with the April consolidation peak, while the 38.2% level (203.5) converges with the 200-day SMA and January highs. The recent pullback has retraced 6.8% from the high—shallow by correction standards—leaving 220–225 as the next major support cluster. A breach of 240 would open the path to the 23.6% retracement, where buyers may re-emerge given historical responsiveness at this level.
Confluence and Divergence Observations
Confluence is evident in bearish signals: the candlestick pattern, volume confirmation, moving average breakdown, and Bollinger Band expansion collectively target 220–225. Divergence exists between momentum oscillators and price—while RSI and KDJ show oversold conditions, MACD exhibits no bullish divergence. This implies oversold bounces may be shallow and temporary until MACD stabilizes. The 240–245 zone represents critical support, combining the 100-day SMA, psychological round number, and lower Bollinger Band. Failure here could accelerate selling toward Fib support at 225.5. Conversely, recovery above 255 (reclaiming the 50-day SMA) would invalidate the immediate bearish thesis. Probabilistically, the weight of evidence currently favors downside continuation toward 225–235 before stabilization.