Broadcom Surges 6.35% Amid Cup and Handle Breakout; RSI Dead Cross Raises Eyebrows
1min read Broadcom (AVGO) has seen a notable rise of 6.35% on April 24th, marking a three-day uptrend and a cumulative increase of 13.20%. This upward trajectory has caught the attention of investors, particularly as the company's price chart has formed a cup and handle pattern. This technical formation typically indicates a potential breakout, with a rising baseline that resembles a cup. Once the cup shape is complete, the price often moves sideways, forming a handle that creates a consolidation range or brief pullback.
Currently, broadcom is navigating through the handle area of this configuration. Market participants are advised to keep a keen eye on Broadcom's trading volume as a breakout from the handle's trading range often signals a significant volume shift, potentially heralding the continuation of a pre-existing bullish trend.
A thorough back-test of historical occurrences shows that since 2020, Broadcom's stock has exhibited the cup and handle pattern, with prices elevating at the base, on 84 occasions. While this pattern is generally perceived as bullish, its reliability depends on the clarity and duration of the formation. An inconsistent price movement or a very short consolidation period within the handle could weaken the credibility of this pattern.
On the downside, technical analyses suggest that Broadcom's stock currently displays an RSI dead cross signal. The Relative Strength Index (RSI) dead cross typically indicates waning momentum and a shift in market sentiment, where the short-term RSI line crosses below the long-term line.
For traders and analysts, understanding the RSI index involves interpreting the numerical value between 0 and 100, which represents the strength of market participants. An RSI above 80 could signal an overbought condition, while a value below 20 may indicate oversold conditions. Although the back-tested data reflect that RSI dead cross occurrences haven't substantially harmed Broadcom's stock performance, they can still serve as a cautionary indicator for potential market risk.
