Important points
Broadcom (AVGO) stock soared in after-hours trading on Thursday after the chipmaker reported better-than-expected earnings and issued a rosy outlook on the back of strong AI-led sales growth.
The company announced that its AI XPU and Ethernet networking portfolio more than tripled AI revenue in fiscal year 2024. Chief Executive Officer Hock Tan told analysts on an earnings call that he expects big AI opportunities over the next three years, with accelerator and networking revenue expected to reach between $60 billion and $900 million in fiscal 2027. The after-hours rally accelerated after the company added that it expected it to reach $1 billion.
By Thursday’s close, Broadcom stock had risen 64% since the beginning of the year. Shares rose 14% in extended trading to around $206.
Below, we analyze the technicals of Broadcom’s weekly chart and identify the key price levels worth paying attention to.
Ascending Triangle Breakout
Broadcom stock has been stable within an ascending triangle since mid-June, a chart pattern that signals a continuation of the stock’s long-term upward trend.
In fact, price broke above the formation’s highest trend line on Friday and is poised for further upside.
Furthermore, the Relative Strength Index (RSI) is just above 50, confirming the bullish momentum and indicating that the stock has plenty of room to test higher towards price discovery.
Apply technical analysis to predict potential upside targets and also identify two major support levels that are likely to attract buying interest during retracements.
Bar pattern upside target price
To predict a stock’s upside target, investors can use the bar pattern tool. This tool helps predict future direction by analyzing previous trends.
When applied to a Broadcom chart, this tool extracts the stock price upward trend from December 2023 to June of this year and repositions it from the upper trend line of the ascending triangle. This would put the long-term upside target at around $315.
We picked this previous move that started following a decisive earnings-driven rally above a continuation pattern on the charts last December, which is similar to the expected price movement after the company’s latest quarterly report .
Key support levels to look out for during pullbacks
During the pullback, investors should first focus on how the price reacts to the $185 level. This position on the chart is likely to attract buying interest near the upper trend line of the ascending triangle, potentially reversing from a previous resistance area to a future support area.
If sold below this level, Broadcom stock could re-approach downside support near $140, tying investors to a series of comparable trading activity on the chart from February through September. It is possible that it will look for purchasing opportunities near the horizon.
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As of the date this article was written, the author did not own any of the securities mentioned above.
