Broadcom has been in the process of forming an inverse head and shoulder setup since August 2011. This popular pattern indicates exhaustion among sellers, a fact that BRCM buyers should be using to their advantage right now. The neckline at $38 was the breakout level to watch in BRCM, but shares have held above that level for a week and change now. With shares consolidating just above the neckline, it makes sense to be a buyer on the next thrust up for BRCM.
Even though the head-and-shoulders (and its inverse) is likely the most well known technical pattern, it's still a valuable one: an academic study conducted by the
Federal Reserve Board of New York found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in "profits
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