Shares have risen 6% on Friday after the company reported second-quarter earnings after the close on Thursday. With shares near $328, the stock is just a few dollars away from passing its all-time high at $331.58.
That’s even after the company reported in-line earnings results, although revenue topped expectations. Sales of $5.74 billion grew 4% year-over-year and beat analysts’ estimates by $50 million.
Guidance was just okay, with management looking for third-quarter sales of $5.6 billion to $5.9 billion, while the consensus estimate sits at $5.8 billion. Strong demand is present, but supply chain constraints are restricting business, management said.
It’s better to have a supply chain strain than a lack of demand, and clearly investors see it that way too, bidding Broadcom stock higher. Let’s refresh the charts.
Trading Broadcom Stock
The chart above is adjusted for dividends, which shows Broadcom stock hitting new all-time highs. Investors have to be careful though, that new highs (on an unadjusted basis) won’t be hit until the stock clears $331.58.
If it can close above this mark, Broadcom stock will be in a clear breakout.
In the fourth quarter of 2019 and first quarter of 2020, this $325 area has been tough resistance. Shares have not been able to clear it, being rejected on each rally up toward this mark.
With earnings out of the way — and with Wall Street responding favorably to the report — all Broadcom needs is the broader market to continue higher. If the stock rallies to new all-time highs, investors will have their eye on $350. Above $350 is the 123.6% extension near $366.
Should shares reverse lower, look for a post-earnings gap fill down toward $310. Below puts $300 in play, followed by the 20-day moving average, then the 200-day moving average.
In terms of the downside though, let’s not overcomplicate it. Below $310 changes the bullish trade and will force us to reconsider the setup.