AVGO Pushes Higher on Morgan Stanley's Top Pick Designation

Near-term options traders are put-focused

by Josh Selway

Published on Nov 19, 2019 at 9:32 AM

Broadcom Inc (NASDAQ:AVGO) is trading up 1.9% at $317 this morning after Morgan Stanley named the semiconductor stock a top pick, upgrading its view to "overweight" from "equal-weight" and lifting its price target to $367 from $298. The brokerage firm cited overly pessimistic sentiment around the security, writing that it's bullish on Broadcom's software business, which should have the company well-positioned to benefit from the era of big data.

Speaking of sentiment, call buying has been very popular in recent weeks at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), but near-term open interest is still unusually put-heavy. This is according to AVGO's Schaeffer's put/call open interest ratio (SOIR) of 1.19, which ranks in the 84th annual percentile. This skew is due to the heavy put open interest in the January series, which holds the top two open interest positions at the 250- and 260-strike puts.

Looking back at the charts, the setup does look to favor the bulls, with AVGO shares close to breaking out to fresh highs. The stock has added 11.6% in the past three months, and could now find support at the $305 area, the site of previous resistance from June through September. If Broadcom does keep pushing higher, we'll likely see more bullish brokerage notes, since it's fast approaching the average analyst price target of $323.30.


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