Broadcom’s shares experienced a notable jump in after-hours trading this Thursday, following the release of an impressive earnings report that outperformed expectations. The company also issued an optimistic forecast, largely fueled by strong growth in sales linked to artificial intelligence.
Come Friday, it seems the stock is gearing up for a breakout from an ascending triangle pattern, which would further support the ongoing upward trend seen over a longer period.
Utilizing a tool that tracks pattern bars, which can follow a stock’s upward trajectory—particularly from December 2023 through to June—we reposition this trajectory starting at the top trendline of the ascending triangle. This approach suggests a potential price target of approximately $315.
For investors keeping an eye on Broadcom’s stock, it’s prudent to monitor critical support zones, especially during any decline, around $185 and $140.
Broadcom, trading under the ticker AVGO, saw its shares soar during after-hours on Thursday. This surge came on the heels of announcing robust quarterly earnings that surpassed forecasts, and an optimistic sales outlook driven by advancements in AI technologies was highlighted.
The company’s fiscal year 2024 revenue from AI more than tripled. This surge was bolstered by its range of AI XPU products and its Ethernet networking offerings. Adding to the market’s enthusiasm, CEO Hock Tan expressed to analysts during the earnings call that he foresees significant AI opportunities unfolding over the next three years. He projected that by fiscal 2027, accelerator and networking sales could hit anywhere between $60 billion and $90 billion.
Up to Thursday’s market close, Broadcom shares had increased by 64% since the beginning of the year. In extended trading, they surged another 14%, reaching around $206.
In the sections below, we’ll delve into Broadcom’s weekly technical chart and highlight important pricing levels to monitor.
Since mid-June, Broadcom’s shares have remained consolidated within an ascending triangle—a chart pattern that typically suggests the continuation of a longer-term upward trend.
Indeed, with prices appearing ready to break out above the top trendline of this formation on Friday, there seems to be potential for further gains.
Additionally, the relative strength index (RSI) currently readings just above 50, suggesting a positive momentum. This indicates that there’s plenty of capacity for the shares to push higher as they explore new pricing territories.
Implementing technical analysis techniques, we’ll aim to project a potential upward price target while also pinpointing two crucial support levels that might attract buyers during any pullbacks.
To estimate a potential rally target for the stock, investors might turn to the bars pattern tool. This tool assesses past trends to assist in projecting future movements.
When plotting this on Broadcom’s chart, we take the upward trend from December 2023 to June and reposition it from the top trendline of the ascending triangle. This exercise hints at a longer-term target of around $315.
This prior movement was chosen because it began with a decisive, earnings-driven ascent beyond a continuation pattern seen on the chart last December. A similar pattern looks to be on the horizon following the company’s most recent quarterly results.
When the market undergoes pullbacks, it’s important for investors to initially observe how prices respond to the $185 mark. This particular price point might attract buyers near the top trendline of the ascending triangle. What previously acted as resistance could transition into a support area.
If, however, the price dips below this level, Broadcom’s shares might revisit the lower support zone close to $140—a region where investors might find buying opportunities. This area aligns with a horizontal line connecting similar trading patterns observed on the chart between February and September.
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As of writing this article, the author does not hold any positions in the mentioned securities. You can read the original piece on Investopedia.
