What does the gap on Broadcom Inc. (AVGO) do to the charts? The trading day is far from over so anything could happen, but let's look at the charts and indicators and see what kind of intelligent projections we can make.
In this daily bar chart of AVGO, below, we can see that prices made a low back in July and rallied to late April and early May. Prices corrected sharply lower in May, including a gap to the downside. AVGO tested the rising 200-day moving average line in late May and rebounded this month stopping short of the underside of the declining 50-day moving average line. The volume pattern is hard to "read," but the On-Balance-Volume (OBV) line rolled over in April and declined in May, suggesting that sellers had become more aggressive -- a change from the bullish OBV line from July to the middle of March. The trend-following Moving Average Convergence Divergence (MACD) oscillator shows a peak in April and a decline below the zero-line in May for an outright sell signal. The oscillator has rebounded slightly in June but is likely to turn lower again.
In this weekly chart of AVGO, below, the price action does not include today's drop. AVGO is likely to retest the rising 40-week moving average line. The weekly OBV line shows a peak in April and the MACD oscillator crossed to a take-profits sell signal at the beginning of May.
In this Point and Figure chart of AVGO, below, there is no gap as this charting technique assumes that prices did trade in the gap. An upside price target is shown but a trade below $250.70 is likely to precipitate further weakness.
Bottom line strategy: AVGO could rebound today from its morning low, but some of the gap is probably going to remain. A close below $250 is key on the downside while a rally to $294 is needed to keep the picture bullish.