Broadcom, Inc., is a holding company, which engages in the design, development, and supply of analog and digital semiconductor connectivity solutions. It operates through the following segments: Wired Infrastructure, Wireless Communications, Enterprise Storage, and Industrial and Other.
Take a look at the 1-year chart of Broadcom (NASDAQ: AVGO) below with my added notations:
Over the past three months, AVGO has been trending higher, while also forming a nice trend line of support (green) along the way. Always remember that any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its relevance. A pullback to the AVGO line provides trading opportunities, one way or another.
The Tale of the Tape: AVGO has formed a trend line of support. A long position could be entered on a pullback to the trendline, with a stop placed below the level of entry. A short position could be entered if AVGO were to break below its trendline.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT