History Says Now's the Time to Buy the Broadcom Pullback

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

Assistant Editor
Apr 27, 2022 at 12:25 PM
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The shares of Broadcom Inc (NASDAQ:AVGO) are flat today, last seen up 0.1% to trade at $560.66. Broadcom stock is pacing for its fourth weekly loss in five, and sports a 10.4% deficit for the month of April.  AVGO still boasts a 21% year-over-year lead, though, and could soon pivot higher, given the semiconductor name's latest dip has placed it near a trendline with historically bullish implications. 
 
The trendline in question is Broadcom stock's 200-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 6.3% gain. From its current perch, a comparable move would place the stock just shy of $596.

 

AVGO Chart April 27

It's also worth noting that the security's 14-day Relative Strength Index (RSI) of 23 sits firmly in "oversold" territory. This indicates that a short-term bounce could be on its way. 

 A shift in the options pits could create additional tailwinds for AVGO. 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). This ratio sits higher than all but 6% of readings in its annual range. This suggests a much healthier-than-usual appetite for puts in the last two weeks.

Echoing this, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.82 stands higher than 87% of readings from the past year. This implies short-term options traders have been more put-biased than usual. 

 




 
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