Broadcom Could Rally to New 2020 Highs

Assuming AVGO trades sideways for a bit, traders could use that consolidation to go long.

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.)

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