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
