AVGO
Broadcom (NASDAQ: AVGO) has recently made headlines for less celebratory reasons in the ever-volatile world of chip manufacturing. The stock took a near 4% dip on Monday, aligning with a broader trend where investors are capitalizing on their profits from top-performing stocks linked to the AI boom.
The initial red flag appeared last Tuesday when Broadcom hit a new record high but couldn’t sustain it, reversing course to close lower. This shift began a downward trend, with the stock forming three consecutive red bars, indicative of significant selling pressure on above-average volume.
Revisiting Critical Price Points
As Broadcom's stock grapples with declining momentum, several pivotal retracement levels could attract buyer interest. The first line of defense lies around the $1,410 mark, where the stock may find support from the 50-day moving average (MA), a crucial technical indicator, and a horizontal line connecting multiple peaks over the last four months.
Falling further, the $1,225 level could be another area of support, which intersects with a trendline linking various price actions from February to May. If the decline persists, the $1,150 level may come into play, aligning with a significant high from December 2023 and the rising 200-day MA, potentially drawing in more buyers.
In a more drastic scenario, the psychological $1,000 level is the last line of defense. This level, some 37% below Monday’s closing price of $1,592.21, also correlates with a prominent high from November 2023.
Looking for Bullish Signals
To determine whether buyers might be returning, traders should look for specific bullish price patterns at these support levels. Indicative patterns could include a hammer candlestick or a piercing pattern, both of which signal potential reversals in trend.
Broadcom has experienced a 3.7% drop on Monday alone, increasing its total loss to 14% since its peak last Tuesday. As always, traders should proceed cautiously, keeping a close watch on these crucial price levels and any emerging trading patterns to capitalize on potential shifts in momentum.
