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  1. Home
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Broadcom Is Showing Slowing Momentum: Our New Technical Strategy

I don't want to be too bullish on AVGO.
By BRUCE KAMICH
Dec 02, 2020 | 02:00 PM EST
Stocks quotes in this article: AVGO

Broadcom Inc. (AVGO) has reached one of our upside price targets so a fresh review is needed.

We last looked at AVGO on Aug. 31 and recommended, "Traders and investors could stay long AVGO ahead of earnings as all the charts are bullish. I have no special knowledge of the earnings' numbers, but it looks like a positive report is being discounted. Risk a close below $315. $400 and $421 are the next upside price targets."

Now that prices have passed $400 a new strategy may be warranted.  

In the updated daily bar chart of AVGO, below, we can see that the shares have traded higher since our last review. The $400 price target has been reached and we are not far from the $421 objective. Traders could raise stop protection to $370 from a close below $315. Prices are above the rising 50-day moving average line but a bit extended when compared to the rising 200-day line that intersects around $310 now.

Trading volume has been diminishing since early September which is not a bullish setup. The On-Balance-Volume (OBV) has not broken above its October peak even though prices have made new highs. The 12-day price momentum study is showing lower highs from September while prices have made higher highs. This is a bearish divergence and can foreshadow a correction or pullback. 

 
In this weekly bar chart of AVGO, below, we can see a mixed picture. Prices have more than doubled from the March low. AVGO is above the rising 40-week moving average line and the OBV line has been strong.
 
The 12-week price momentum study in the bottom panel of the chart shows weakening momentum readings from June. Momentum has been slowing for half the year and is a large divergence.  
 
 
In this daily Point and Figure chart of AVGO, below, we can see a potential upside price target in the $490 area -- a triple from the March nadir.  
 
 
Bottom-line strategy: Raise stop protection to $370 and look to book some profits on approach to $420. Our new Point and Figure target of $490 cannot be ruled out but with price momentum slowing I don't want to be too bullish on AVGO.

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

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TAGS: Investing | Stocks | Technical Analysis | Semiconductors & Semiconductor Equipment | Technology

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