Broadcom Could Rally to New 2020 Highs

Assuming AVGO trades sideways for a bit, traders could use that consolidation to go long.
Stocks quotes in this article: AVGO

Broadcom (AVGO) was given a thumbs up from Jim Cramer during his Mad Money program Wednesday evening.  In his "No-Huddle Offense" segment of the program, Cramer said with China coming back online there are lots of opportunities being created and he was bullish on Broadcom.

Let's review the charts of this manufacturer and supplier of semiconductor and infrastructure software products.  

In this daily bar chart of AVGO, below, we can see how prices have quickly retraced more than half of the previous decline. Prices are testing the underside of the declining 50-day moving average line.

The daily On-Balance-Volume (OBV) line has moved up smartly from its March low and is not all that far away from making a new 2020 high. Trading volume was heavy into the March low making it easy for an aggressive buyer to acquire a big long position without attracting much attention.

The Moving Average Convergence Divergence (MACD) oscillator crossed to the upside last month for a cover shorts buy signal. The MACD has improved so much it is poised to cross the zero line for an outright go long signal. Impressive.   

 
 
 
In this weekly Japanese candlestick chart of AVGO, below, we can see the long lower shadows below $195 as those prices were strongly rejected by traders and investors.
 
The weekly OBV line has responded on the upside and the MACD oscillator on this longer time frame is narrowing towards a cover shorts buy signal. 
 
 
 
In this daily Point and Figure chart of AVGO, below, we can see the new high for the move up at $266.12 and the potential upside price target in the $351 area - a new high for 2020 if it is reached.  
 
 
Bottom line strategy: AVGO has made a strong upside run from the March nadir so a period of sideways price action would be nice. Assuming AVGO trades sideways for a bit, traders could use that consolidation to go long. Risk to $225 for now and look for $350 for our price objective.
 

(Broadcom is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AVGO? Learn more now.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are prohibited from trading individual securities.

TAGS: Investing | Markets | Stocks | Technical Analysis | Trading | Semiconductors & Semiconductor Equipment | Software & Services | Technology | Mad Money

More from Investing

Costco Is Overdue for a Breakout

Bruce Kamich

COST is poised to break out from a large triangle formation

Dropbox Warrants a Flyer

Timothy Collins

With price pushing above resistance today, a small upside play could be considered here, especially if you remain under invested.

Barcode Maker Cognex Is Emerging From a Large Base Formation

Bruce Kamich

Let's check the charts and indicators of this technology company.

The Market Can Remain Irrational Longer Than You Can Remain Solvent

James "Rev Shark" DePorre

If the market can't sell off on this news then what reason does it have to dip?

Fastly Could Rally Even More Despite Being Extended

Bruce Kamich

Let's check out the latest charts and indicators.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight