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After Broadcom Earnings, Should Investors Buy the Dip?

Broadcom stock is dipping on Friday, despite the company's report of a solid quarter. Let's look at the charts.

Shares of Broadcom  (AVGO) - Get Broadcom Inc. Report are down about 1% at this writing on Friday after the chipmaker reported earnings.

Revenue rose almost 12% year over year, while Broadcom beat analysts’ expectations on earnings. Overall, Wall Street has a rather favorable take on the company’s quarter.

The solid fiscal fourth quarter has analysts jumping on board, even if the stock isn’t reacting as favorably.

Several analysts raised their price targets to levels well about current prices. Morgan Stanley’s new target is $495. Even one of the lowest new targets sits at $450, implying more than 10% upside to the current price.

Perhaps Broadcom's weakness is due to the overall weakness in tech, and more specifically, Qualcomm  (QCOM) - Get Qualcomm Inc Report, which was down almost 9% at one point on the day. In any regard, these observations likely don’t help Broadcom.

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Daily chart of Broadcom stock.

Daily chart of Broadcom stock.

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While investors are not gobbling up the stock, Broadcom has been very strong from the first-quarter lows.

Just this week, the shares hit a new high, topping out at $426.70. But we’ve seen a quick three-day pullback. At Friday's low, the shares were down 6.7% from this week’s high.

But I like Broadcom on the dip, provided it can keep its footing.

The $395-to-$400 area has been decent support this month, after previously rejecting Broadcom in November. It also coincides with the 20-day moving average near $397.

With a decent bounce off the lows, this area remains responsive for the stock.

From here, the bulls want to see Broadcom take out Friday’s high and fill that gap back toward $410. If it can, it may push back up toward the prior highs and the 161.8% extension.

Should Broadcom stock go on to make new highs, let’s see if the two-times range extension is in play, all the way up at $489.46. That would put Morgan Stanley’s price target in play, too.

If the stock takes out the recent low, let’s see if the 50-day moving average can buoy it. Below puts $370 on the table.