Broadcom (AVGO) shares surged after reporting better-than-expected earnings and a positive outlook fueled by robust AI sales growth. This analysis explores the technical aspects of Broadcom’s weekly chart, highlighting key price levels and potential breakout patterns.
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Broadcom’s fiscal 2024 AI revenue more than tripled, driven by strong demand for its AI XPUs and Ethernet networking portfolio. CEO Hock Tan projected significant AI opportunities over the next three years, estimating accelerator and networking sales between $60 billion and $90 billion in fiscal 2027. This positive outlook, shared during the earnings call, further propelled the stock’s after-hours gains. Year-to-date, Broadcom shares have seen a remarkable 64% increase, with a further 14% surge to around $206 in extended trading following the earnings announcement.
Technical Analysis: Ascending Triangle Breakout
Broadcom’s recent price action indicates a potential ascending triangle breakout on the weekly chart, suggesting a continuation of the stock’s existing upward trend. This pattern, formed since mid-June, typically signals further upside momentum. The stock is currently positioned to break above the triangle’s top trendline, reinforcing the bullish outlook. Furthermore, a relative strength index (RSI) reading just above 50 confirms this positive momentum, indicating potential for further price appreciation as the stock enters price discovery.
Projecting Upside Price Target with Bars Pattern Analysis
Using the bars pattern tool, which leverages historical trends to forecast future price movements, we can estimate a potential upside target for Broadcom. By extracting the stock’s upward trend from December 2023 to June 2024 and repositioning it from the ascending triangle’s top trendline, a longer-term price target of approximately $315 emerges. This specific historical period was chosen due to its similarity to the current situation: a significant earnings-driven surge above a continuation pattern. This parallel suggests a potential for similar price action following the latest quarterly report.
Identifying Key Support Levels for Potential Pullbacks
While the outlook is bullish, it’s crucial to identify potential support levels in case of retracements. The $185 level, coinciding with the ascending triangle’s top trendline, is a key area to watch. This level could transition from resistance to support, attracting buying interest. Should the price fall below this level, the $140 mark presents another significant support zone. This area, characterized by a horizontal line connecting periods of trading activity between February and September, could offer further buying opportunities. Monitoring these support levels can provide insights into potential entry points during market fluctuations.
Conclusion: Broadcom’s Bullish Trajectory
Broadcom’s strong earnings, driven by significant AI-related growth, coupled with a potential ascending triangle breakout, paint a bullish picture for the stock. The projected price target of $315, based on historical trend analysis, suggests significant upside potential. However, investors should also monitor the key support levels of $185 and $140 in case of pullbacks. This analysis provides a framework for understanding the current technical landscape of Broadcom and highlights key areas to watch as the stock continues its upward trajectory.
