We had a cautious approach to Broadcom Ltd. (AVGO) in our last update in early December, saying that, "When a stock opens sharply higher and then gives up those gains you have to be careful. Traders and maybe investors are selling into strength. Carryover weakness in the next few days could break the 50-day average line and bring us closer to the rising 200-day line."
With a few more weeks of price action we can see, chart below, that AVGO did break the 50-day moving average line. Prices are closer to the rising 200-day line. The On-Balance-Volume (OBV) line has been flat on yielding any clues about whether traders are being more aggressive buyers or sellers. The Moving Average Convergence Divergence (MACD) oscillator went into bearish territory last month and may now be signaling a cover shorts buy signal.
In this weekly bar chart of AVGO, below, we can see that prices are still above the rising 40-week moving average line. The weekly OBV line has declined from November unlike the daily line. The 12-week momentum study shows a longer bearish divergence as momentum has weakened from February/March to July, and now while prices have made higher highs. This divergence tells us that the uptrend is slowing but it does not tell us that the trend can or will reverse. A slowing uptrend tells us to remain cautious.
In this Point and Figure chart of AVGO, below, we can see a small upside breakout but we can also see that the Bollinger Bands are relatively narrow. Narrow bands tells us that volatility has diminished and this can foreshadow the start of a new trend up or down. A decline to $253.21 or lower is needed to really weaken this chart.
Bottom line: AVGO has been a leadership stock and the bulls would love to see that continue, however, I am not convinced at this point in time.