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.
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Shares of Broadcom  (AVGO) - Get 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 Report, Broadcom or Amazon  (AMZN) - Get 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.

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Trading Broadcom

Daily chart of Broadcom stock.

Daily chart of Broadcom stock.

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.