Don't Ignore This Chart!

Broadcom Bouncing Off Gap Support

Tom Bowley

Tom Bowley

Chief Market Strategist, EarningsBeats.com

Broadcom (AVGO) posted quarterly EPS in early June that topped Wall Street forecasts and the stock gapped higher from 155 to above 165.  Now, just a few weeks later, AVGO has returned to the scene of the crime, testing gap support and its rising 20 day EMA.  Volume has been much lighter on the retreat as well, setting up a possible long trade with a solid reward to risk.  Check it out:

Heavy volume accompanied the most recent earnings-related gap higher and AVGO was very overbought on that push to the upside.  Since that time, the selling has relieved the overbought conditions and AVGO's relative strength vs. semiconductors has neared key relative support.  In addition, the SCTR on AVGO has remained above 50 for the past few months and it's currently close to that support as well.  Should the stock market turn higher again, look for leadership from semiconductors with AVGO potentially leading the group.  I'd look for a test of 165 resistance initially.

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist of EarningsBeats.com, a company providing a research and educational platform for both investment professionals and individual investors. Tom writes a comprehensive Daily Market Report (DMR), providing guidance to EB.com members every day that the stock market is open. Tom has contributed technical expertise here at StockCharts.com since 2006 and has a fundamental background in public accounting as well, blending a unique skill set to approach the U.S. stock market. Learn More