6 Jun

Broadcom Inc. Analysis

Let me be honest: When analyzing a companies stock, I don't care what a company does, if they provide services, are a manufacturing company, or something else, I don't look at the financials or the team the company is run by. I only care about the chart and whether I see patterns in accordance with other technical stuff I look for on a chart.

In my experience, trading the news or trying to forecast the future of a company by looking at the economy, evaluating the CEO & his team, the companies' financials etc. is gambling as at any moment there can be embargoes, political events or something else where you can't forecast the impact it has on the company.

If you know how and when to trade (especially if you're daytrading or scalping) you're able to limit the time your trade spends in drawdown, better calculate risk and can avoid most of these unexpected events, thus improving your RR and other account statistics

However, if you do care about the specifics of the company and want to get a better understanding of their operations etc., here's the companies website.

At first glance, we can see that AVGO has taken Buyside Liquidity (BSL) twice, with a fast retraction from that top meaning we'll likely experience lower prices.

Since there's been 2 BSL pools (marked in turkis), that price has traded above, for me that's even more of an indication of lower prices. If that first high had not been traded above, I would be more cautious, as price could reach higher one more time before going lower.

Drawing the Fib Retracement from that last low of the Sellside Liquidity (SSL) pool to the high that has reached above both BSL pools, we can see that the 1.27 Rebound almost matches identically with the Gap beneath the SSL.

Why do I take the low below the 1.27 Retracement and not the one above?

The one above would also be a nice are for taking profit, definitely. But I want to look for the max range price can go before price reverses.

Also, there is another Gap in that down move pretty much at the same level and low volume, meaning order are left over and price will be drawn to that level, so the orders can be filled after an expansion lower. That's a draw on liquidity.

When price went down to the gap, notice that all the bodies respected the lower end of the Gap. After the market opened, price gaped into the SIBI marked on the chart, almost closing it, but retrace fairly quickly, implying the market wants to go lower.

So now we're at the crossroads between a possible retracement, and further downward expansion. Since price seems to have found short term support, I wouldn't enter a trade right now, especially being at equilibrium of the dealing range (where the Fibonacci is drawn).

If we retrace higher towards the Gaps, I wouldn't want to see price go too deep into the consolidation area, actually I would prefer it going higher towards the first Gap with indications of price wanting to move away from that area.

Actually, there's a SIBI slightly below the consolidation. I would need to see how price reacts at that level, but from a forward-looking perspective, this would be the best possible entry of this chart right now.

Going down the timeframes we have the 5m chart where we can see a Gap slightly below the MT (Mean Threshold/Midpoint of the SIBI) and at the same level another smaller SIBI. Depending on where markets open tomorrow, this level will be a deciding factor of how price will move going forward

Worst Case (for the Company)

Besides the Rebound 1.27, there's the Rebound 1.618 Rebound and the subsequent big FVG + actual Gap that would open in case we traded below the Rebound 1.27 and its Gap.

Depending on how the indices are looking, we could experience some resistance at the 1.618 level, as there's a very clean +OB (Order Block) sitting right at that level.

The indices and the DXY (Dollar-Index) are a determining factor here. How DXY and the indices are affecting single stocks is a topic for another day. I'll update the idea when we get to that level. Just know this, for scalps or smaller daytrades I wouldn't care too much about the effect on US stocks (I don't scalp stocks), but I would have a window on my screen open, just for confirmation and to see if I can enter or should hold off on the trade for a moment.

Also, there's a very clean Gap at around $750, that would be interesting if we continue lower. Why exactly is this Gap of importance? Very clean equal lows (SSL) at around $800 that could be taken by going below it and filling in the orders left from that Gap up.

Also, there are the lows of 2022 and 2020, but since I want to keep this analysis more focused on the short term and can't say much about price later besides the possible targets, I'll talk about these levels once we get there.