Broadcom Beats on Earnings, but the Stock is Overbought

Broadcom Inc. (AVGO), which has beaten the earnings per share (EPS) estimates for the 31st consecutive quarter when it reported results after the close on the 4 June. The positive reaction to this report has been of short duration. The stock traded as high as $328.11 on 5 June, and then disappeared below its monthly and quarterly pivots at $300.40 and $297.35. The remaining stock below its intraday high of $331.58 game on Jan. 24 is a matter of concern for the bulls.

Broadcom stock closed on Tuesday, June 16, at $310.72, down 1.7% year to date and 6.3% below the all-time high. The stock is also in the bull market territory to 99.6% above its March 18 low of $155.67. Broadcom has a P/E ratio of 18.10 and offers a generous dividend yield of 4.29%. This makes the stock of a company suitable for value investors.

The daily chart for Broadcom

Refinitiv XENITH

The daily chart for Broadcom shows that the stock has been moving sideways to the top, followed by its 200-day simple moving average. The stock made its intraday high of $331.58 on Jan. 24 – then came the month of March crash.

Broadcom stock has dropped below 50 days simple moving average on Feb. 20 and 200-day simple moving average failed to hold the Feb. 25. The stock went from $331.58 on Jan. 24 the March 18 low of $155.67. This bear market has been a decline of 53.6%.

The V-shaped rise from the March 18 low reached the 50-day simple moving average, the 9 April. The 200-day simple moving average was taken on the 27th of May. The second quarter pivot at $297.35 and the monthly pivot for the month of June to $300.40 were magnets.

The weekly chart for Broadcom

Refinitiv XENITH

The weekly chart for Broadcom is positive but overbought, with its five-week modified moving average of $288.92. The stock is also above its 200-week simple moving average, or the return to the average, to $249.85. Broadcom has been above this key average since the week of April 10.

The 12 x 3 x 3 weekly slow stochastic reading should rise to 85.19 this week, moving above the overbought threshold of 80.00 on a scale of 00.00 to 100.00. If the reading rises above 90.00, the stock would be in a “swell parabolic bubble” of the training.

Trading strategy: Buy Broadcom stock on weakness to its 200-week simple moving average at $249.85. Reduce holdings on strength to an annual risky level at $337.86, this would be a new all-time intraday high. The quarterly and monthly pivots at $297.35 and $300.40 will probably be magnets until the end of the month of June.

How to use my value levels and risky levels: The share price closing price on Dec. 31, 2019, has been an entry to my proprietary analytics. Half-yearly and annual, the levels are still on the charts. Each calculation uses the past nine closes in these time horizons.

The second quarter of 2020 the level has been established based on the 31 March, close by, and the level of the month of June has been established on the basis of the May 29 close. New weekly levels are calculated following the end of each week, while new quarterly levels occur at the end of each quarter. Half-yearly levels are updated at mid-year, the levels are set throughout the year.

My theory is that nine years of volatility between the farm are to assume all possible bullish or bearish event for the stock are taken into account. To capture the volatility of stock prices, investors should purchase shares of the weakness of a plan, the value and reduce the holdings of the strength to a risky level. A pivot is a level value of the risk level that was violated in its time horizon. Hubs act as magnets that have a high likelihood to be re-tested prior to their time horizon expires.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings has been based on the backtesting of many methods of reading the stock prices of the momentum with the objective of finding the combination that resulted in the least number of false signals. I’ve been following the stock market crash of 1987, so I was happy with the results of more than 30 years.

The stochastic reading covers the duration of 12 weeks, high, low, and close for the stock. There is a row of calculation of the difference between the highest and the lowest compared to the farm. These levels are modified for a fast reading and slow reading, and I found that the slow playback will work best.

The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered as overbought and readings below 20.00 regarded as oversold. A reading above 90.00 is considered to be a “swell parabolic bubble” of the training, which is usually followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered to be “too cheap to ignore,” which is usually followed by a gain of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.


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