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AVGO (Broadcom Limited) Trade Setup

AVGO (Broadcom Limited) will trigger a short entry on any move below 174.69 (yesterday's low) with a suggested stop over 186.00. Price targets are T1 at 149.16 and T2 at 140.29 with a potential longer-term swing target around the 115.00 support level which may be added, depending on how the charts of AVGO & the broad market play out going forward.

AVGO daily Aug 26th

AVGO daily Aug 26th

For those currently in or considering any of the other semiconductor related trade ideas currently listed on the site, make sure to properly allocate any potential position in AVGO towards your total target exposure to the semiconductor and/or technology sector as AVGO is a semiconductor company.

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Aug 26, 2016 2:32pm|Categories: Completed Trades - Short|Tags: |5 Comments

5 Comments

  1. dadtoaaaaaa August 26, 2016 2:36 pm at 2:36 pm

    This company announces earnings on 09-01-2016 After market.

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    • rsotc August 26, 2016 3:00 pm at 3:00 pm

      Thx for the heads-up on the AVGO earnings date. I really like the technicals on this one so I took a partial/starter short position in advance of the official short entry today. I’ll be fine riding out any potential post-earnings pop, which I will likely fade unless I’ve already taken it up to a full position. The fact that they report on next Thursday after the bell is likely to limit the stock from making any big moves in either direction until thenalthough a swift sell-off in the market would be likely to bring the stock down along with most everything else.

      With that being said, many traders prefer to close short positions before an earnings date & if so, they might want to hold off on a short entry on AVGO until the dust settles from their earnings report & guidance sometime after the open next Friday.

      Short interest on Broadcom is at the low-end of its historical range and according to the data that I checked, this stock has an unusually large 95% ownership by institutions and only 0.03% of shares held by insiders. If AVGO happens to disappoint on Thursday evening, it’s going to be one darn crowded exit as all those institutional holders decide to unload the stock at the same time, especially with the current low-short interest (not many shorts to step in to buy the shares take profits but a whole lot of potential new short sellers able to jump in).

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      • dadtoaaaaaa August 26, 2016 7:16 pm at 7:16 pm

        AVGO has beat the past 8 qtr reports. However, I have been watching this one as well, and thinking I will take this one short with you. I have noticed this most recent earnings season that even companies with strong track records have not popped up unless it is a big beat. Especially with the recent run up for AVGO, my thought is those institutions you mentioned will be expecting a lot, and if they do not get it they are out, as you said. One example of this was today with ULTA, who has done very well post earnings traditionally, but today dropped 6% on a modest beat. My thought is AVGO may have the same scenario, if they do not really impress. Right now I have a short position in SMH (front month Put options), and want to add some individuals AVGO, NVDA, MU, AMBA, etc. because the semis certainly seem to be due for a correction.

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  2. russ66 August 28, 2016 7:59 am at 7:59 am

    AVGO question for rsotc:

    Risk/Reward to T1 calculated as 2.25. ((173.68 – 149.16) / (186. – 173.68))
    Are we varying the 3 to 1 R/R criteria here?

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    • rsotc August 29, 2016 12:48 pm at 12:48 pm

      rsotcruss- Unless multiple stops are listed for multiple price targets on a trade idea, the suggested stop, which I often refer to as the max. suggested stop, is always based on the final price target for the trade. In this case, if triggered, the entry price would be 174.68 with a current final target of 140.29 and a suggested stop (if targeting that final target) of 186.01, thereby providing an R/R of slightly better than 3:1 (3:04:1 if my math is correct).

      While I neglected to state it here, I usually suggest using a lower stop calculated on an R/R of 3:1 or better, if only targeting one of the early profit targets. The R/R is just a suggestion of course, as are the price targets, entry trigger, stop-loss, etc.. Each trader has different trading styles with their own preferred R/R’s, stop allowances, etc.. so I’m basically just sharing a trade setup that looks compelling to me with the parameters that I use in my own trading.

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