News Likely to Get Worse for Semiconductor Giant
A leading semiconductor software solutions provider has seen its prices reach an extreme and things could turn for the worse soon.
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It was just on June 7, 2024, that I last wrote about Broadcom AVGO and concluded that "Traders could go long AVGO at current levels but they need to risk below $1,300."
I included a daily Point and Figure chart with ".....a price target in the $1,649 area."
AVGO is now trading just shy of $1,700 in the premarket Thursday on the heels of their Q2 results, guidance and a 10-for-one stock split.
Could things get any better?
If the news couldn't get better, it is only likely to get worse. Think about it.
In this daily Japanese candlestick chart of AVGO below, I have to imagine the sharply-higher opening that is expected. Prices will be "off the top of the chart" with a very large upside price gap. In the bottom panel, I can see that the 12-day price momentum study has been slowing and creating a bearish divergence when compared to the price action. Bearish divergences can sometimes foreshadow price reversals.
In this weekly Japanese candlestick chart of AVGO below, I added Bollinger Bands to the chart. Prices will likely open sharply above the upper band and prices are likely to correct back down from that extreme. The 12-week price momentum study in the bottom panel shows weakening price momentum versus higher and higher price levels — a bearish divergence as the indicator and prices are going in different directions.
Bottom line strategy: There is an old saying in the futures market: "Let your profits run and cut your losses short." There is a lot of wisdom in that simple advice, but when prices reach an extreme, it can pay to take profits instead of letting things run.
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