technical analysis AVGO

Technical analysis of AVGO

AVGO, the representative CFD based on Broadcom Inc’s shares, gapped lower at today’s open with relatively high volatility early in the session. As for other manufacturers of semiconductors, shortages of supply are a positive factor for Broadcom and should increase the company’s profits. This technical analysis of AVGO looks at the four-hour chart ahead of earnings tonight.

Broadcom’s EPS has beaten the estimates by at least a few cents for each of the last four quarters with generally consistent growth. The company’s actual PE for 2020 was around 25, making it close to fair value by this measure, unlike many other tech shares which remain strongly overvalued. PE is expected to grow slightly this year to about 27.

Back on the chart, the main resistance is probably the latest high around $488. Low support seems to be the latest low around $420, but this area is unlikely to be tested in the near future unless tonight’s release is extremely negative.

Technical indicators on AVGO H4

 

Moving averages give a fairly weak sell signal. Each of the 50, 100 and 200 SMAs is successively below slower lines; however, the price has been above all three since late last month. The main reference from moving averages is the 200 SMA which might give support over the next few days, although volatility is likely to be high after tonight’s earnings.

There is currently no signal for saturation from either Bollinger Bands (50, 0, 2) or the slow stochastic (15, 5, 5). The latter though at 73 has only recently emerged from the zone of buying saturation, with the signal line still inside the trigger zone. Buying volume has overall been higher than selling over the last several periods.

Price action and Fibonacci

 

20 May’s large gap up which continued to close higher would normally be taken as a strong buy signal. Considering the daily chart for comparison, price is within the upper half of its range since early February. Meanwhile the downward engulfing candle from noon GMT on Tuesday can probably be discounted in the context.

The 50% daily Fibonacci retracement area could be quite a strong zone of support in the near future, being near the 100 SMA and slightly above the psychological area of $450. To the upside, the 38.2% zone of the daily Fibo fan might function as a dynamic resistance depending on sentiment from tomorrow’s opening.

Technical analysis of AVGO: summary

 

Broadcom Inc is expected to release its earnings report for the fiscal quarter to the end of April 2021 tonight, 3 June, after hours. The consensus EPS is $5.43, with the four estimates ranging from $5.28 to $5.65; none of the estimates have been revised in the last four weeks.

Overall the technical picture for AVGO is fairly positive and more gains might be expected in the aftermath of tonight’s earnings report. Conversely, a new high on this chart over the next few days is unlikely unless the reaction to the release is particularly positive.

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