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VOLUME


High-Volume Surge For Broadcom

12/10/08 09:11:58 AM
by Arthur Hill

Broadcom surged off support with high volume and looks poised to break its 50-day moving average for the first time since August.

Security:   BRCM
Position:   Accumulate

Figure 1 shows Broadcom (BRCM) with daily candlesticks over the last five months. The stock declined to 14 in October 2008 and bounced with good volume in the second half of the month. After meeting resistance just below the 50-day, BRCM returned to this support level in mid-November. It looked as if support was going to hold as the stock surged off the October lows with above-average volume.

FIGURE 1: BRCM, DAILY. The stock declined to 14 in October and bounced with good volume in the second half of the month.
Graphic provided by: TeleChart2007.
 
Volume validates the support test and the surge. This validated move points to higher prices with the next resistance levels marking the upside targets. Broken support around 23 turns into resistance and the falling 200-day moving average marks resistance around 21. Taken together, this marks an upside target zone around 21–23.

FIGURE 2: BRCM, DAILY. While BRCM tested support from the October lows in November, the MACD formed a higher low and there was less downside momentum on the support test.
Graphic provided by: TeleChart2007.
 
Figure 2 shows Broadcom with a moving average convergence/divergence (MACD) overlay. While Broadcom tested support from the October lows in November, the MACD formed a higher low and there was less downside momentum on the support test. The MACD moved above its signal line and is approaching the zero line. Further strength into positive territory would be bullish for momentum. In addition, the advance should remain strong as long as the MACD holds above its signal line. A move below the signal line would show waning momentum and call for a reassessment.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
Company: TDTrader.com
Address: Willem Geetsstraat 17
Mechelen, B2800
Phone # for sales: 3215345465
Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

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