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Is Broadcom a Buy on Earnings? Let's Look at the Chart

Broadcom is mixed on earnings despite beating analysts' expectations. Let's look at the key levels on the chart.

Shares of Broadcom  (AVGO) - Get Broadcom Inc. Report were mixed on Friday and have gone roughly flat after reporting earnings.

The company didn't report amid the easiest of times. There’s been quite a bit of volatility in the market lately, mostly in tech stocks. Of the group, most of the selling pressure has been in high-growth holdings.

Still, that hasn’t prevented stocks like Nvidia  (NVDA) - Get NVIDIA Corporation Report, Broadcom or Amazon  (AMZN) - Get Inc. Report from selling off. Now some of these stocks are setting up nicely on a technical basis.

For Broadcom, shares fell about 10% in the three days leading up to earnings.

While shares opened higher, bulls have been hesitant to take it higher. That’s even as the company turned in better-than-expected results.

It also comes after analysts mostly came away with a bullish reaction to the print. Let’s look at the charts.

Broadcom, Nvidia and Amazon are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AVGO, NVDA or AMZN? Learn more now.

Trading Broadcom

Daily chart of Broadcom stock.

Daily chart of Broadcom stock.

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Notice how well Broadcom stock had been respecting the 21-day moving average. Once that level failed as support, the 50-day moving average stepped in and provided a solid bounce.

After that three-day dip though, both levels failed as support.

We’re at an interesting point on the chart. On the one hand, shares are bouncing right off the 161.8% downside extension (the black Fibonacci lines) and holding the long-term 161.8% extension (the blue Fibonacci lines).

At the same though, shares are struggling with Thursday’s low and were rejected by the 50-day moving average. So while support is holding, resistance is being persistent. 

It doesn’t help that support isn’t the strongest line of defense, either. Sure it was good for a bounce and is a decent point of reference, but can it be sustained? We’ve yet to find out.

Bulls ultimately need to see Broadcom back over the 50-day moving average. It can contend with its 21-day moving average after that and work on building the strength to test up toward $500.

But ultimately, it starts with the 50-day moving average. This is the must-clear mark.

On the downside, it’s simple: See if Broadcom can hold its lows.

If it can’t hold Friday’s low, the 100-day and 21-week moving averages are on deck. Given that this area hasn’t been tested in a while and the earnings were good, it should provide a bounce. If it doesn’t, $400 may be up next.