Why Broadcom Stock's Pullback May Soon Be Over

A shift in the options pits could create additional tailwinds for AVGO

Digital Content Manager
Jan 19, 2022 at 3:09 PM
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The shares of Broadcom Inc (NASDAQ:AVGO) are down 1.4% to trade at $569.80 at last check, pacing for their fifth-straight loss, as Broadcom stock continues to pull back from a Dec. 28, all-time high of $677.76. AVGO still sports a 23.8% year-over-year lead, though, and could soon pivot higher, given the semiconductor name's latest dip has placed it near a moving average with historically bullish implications. 
 
The trendline in question is Broadcom stock's 40-day moving average. The shares are currently within one standard deviation of this trendline, after spending months above it. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, six similar signals were observed in the last three years. AVGO saw a positive return one month later in 83% of cases, averaging a 6.6% gain. From its current perch, a comparable move would place the stock back above $607.

 

AVGO 80 Day

Analysts are already firmly bullish towards Broadcom stock. Of the 23 in question, 19 carry a "buy" or better rating, while the remaining four say "hold." Plus, the 12-month consensus target price of $676.33 is already an 18.8% premium to AVGO's current perch.

A shift in the options pits could create additional tailwinds for Broadcom stock. This is per the equity's 10-day put/call volume ratio of 1.36 over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than all but 4% of readings in its annual range. This suggests a much healthier-than-usual appetite for puts in the last two weeks.

 

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