Confrontation is Inevitable

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To follow-up on this post from the other night, you can see another semiconductor is coming to a head. On a longer-term timeframe, Broadcom looks an awful lot like Skyworks in terms of working through a massive, post dot-com bubble base. Both are semiconductor firms with their tentacles deep in all of the smart phone/smart grid developments in the technology sector as a whole.

Earnings are now out of the way for Broadcom. Bears look at the daily chart below and see a head and shoulders top. Bulls might point out the uptick in buy volume over the past week. Coupled with the “doji string” of price candles marking time sideways, the presumption is that the bulls will break this pattern up and out, leaving head and shoulders’ bears drowning in their own dandruff. From failed head and shoulders tops (of which there are plenty in the history of the markets), usually come aggressive moves higher.

Buyers of size want in on Broadcom, and now they have the floor to do their thing. Stage fright could have devastating consequences.

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