Shares of Broadcom (AVGO - Get Report) are surging on Friday, up more than 10.5% at one point and closing higher by 8.2% at $290.29 after the company delivered impressive earnings results. More impressive, though, is the stock's surge to new 52-week highs.
Investors want to know, is it too late to buy into Broadcom or is there still room left to ride it higher? We're getting excellent follow through in many semiconductor stocks lately, as investors continue to buy the dips in this group.
Will that be enough to drive Broadcom higher as we move forward? Let's examine the charts.
Trading Broadcom Stock
Shares of Broadcom are in a totally different trend than the last time we looked at it. In early December, with Broadcom below $240, we were looking for a breakout after a monster earnings report. As you can see on the chart, we got that breakout, but the ride since hasn't been easy.
After topping out near $260 twice mid- and late-December, Broadcom retested its prior breakout zone before resuming its move to new highs. Fast-forward to Friday, March 15, and shares are again rocketing to new highs, hitting $299.55 in the session. Can it go higher?
If AVGO stock can hold onto these gains, the first thing short-term investors should watch is how the stock trades on Monday. If we get a flat to down open in Broadcom stock, watch to see if shares quickly go green on the day. If they do, it sets up a low-risk buying opportunity in the name. We could perhaps even get a multi-day continuation in the stock, much like we saw with Costco (COST) this week. The same entry strategy could have been used then, too.
Longer term, I want to see if prior channel support (thin blue line) will act as resistance near $300 or if Broadcom stock can push back above this mark. It has the growth and valuation to make it compelling, but we have to follow the charts when it comes to price action. Should shares stall over the next few sessions, I at least want to see $285 hold as support.
As it stands, it's hard to be too bearish on this action. It's also hard to hate the report.
Fiscal first-quarter earnings of $5.55 per share grew 8.4% year-over-year and easily topped analysts estimates by 32 cents or 6.1%. Revenue of $5.79 billion missed expectations by just $40 million but grew 8.6% year-over-year. Free cash flow grew 39% and topped $2 billion in the quarter, while gross margins expanded to 55.4% from 49.3%. Finally, management guided for full-year revenue of $24.5 billion, ahead of consensus expectations looking for $24.36 billion in sales.
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