Will Broadcom recover?

Published on Thursday, 10 May 2012 08:52 Written by TradersHuddle Wire

New York, May 10th (TradersHuddle.com) - Shares of Broadcom Corporation (NASDAQ:BRCM) closed the trading session at $33.64 below calculated support at $34.00. The stock broke down technically, raising concerns as the move might trigger additional selling.

Broadcom Corporation (NASDAQ:BRCM) provides integrated silicon solutions that enable broadband digital data transmission of voice, data, and video content to the home and within the business enterprise. The Company designs, develops, and supplies integrated circuits for cable set-top boxes, cable modems, high-speed networking, direct satellite and digital broadcast, and digital subscriber line.

Broadcom's stock was trading in a well defined range with support at $34.00 and resistance at $37.25; given that this range was broken traders will be closely monitoring the stock's price action for clues of direction.

From a technical perspective, it can be expected that previous support becomes resistance, as the new range gets defined. However, $34.00 will remain in focus as Broadcom's price action places the stock near the broken support. Traders will be waiting to see if it can bounce back and return to its previous range.

Traders wanting to establish a short position in Broadcom can do so if the stock breaks the intraday low, or if the stock bounces back and selling materializes again at previous support of $34.00. However, if traders want to build a long position, the best entry point to do so is when the price action takes the stock back to calculated support.