Watch These Broadcom Price Levels After Stock’s Recent Rally on AI Optimism

Broadcom (AVGO) shares rallied to an all-time high this week as the chipmaker positions itself as a key competitor to AI favorite Nvidia (NVDA). 

The stock surged nearly 10% to a record close near $370 Wednesday, before pulling back slightly in Thursday’s session. They’ve added more than half their value since the start of the year, with a close to 20% gain over the past five days alone, boosted by the company’s strong quarterly results, a new $10 billion customer, and the resurgence of the AI trade after Oracle (ORCL) reported a massive increase in its backlog.

In a note to clients on Monday, Melius Research analysts said they expect Broadcom could gain about 30% of the AI compute market, while Nvidia’s market share falls over time.

Below, we break down the technicals on Broadcom’s weekly chart and identify key price levels to watch after the stock’s recent bullish run.

RSI Reading Signals Potential Consolidation

After retracing just below the 50-week moving average in March, Broadcom shares have staged an impressive reversal, with gains accelerating recently after the chipmaker’s quarterly results.

While above-average trading volume has signaled buying conviction, the relative strength index warns of overbought conditions, with the indicator reaching a level that preceded major consolidation phases in the stock during late 2021 and mid-2023.

Let’s use technical analysis to forecast how a long-term uptrend for Broadcom could play out, and also identify support levels worth watching during potential retracements.

Where Is Broadcom’s Uptrend Headed Next?

Investors can use bars pattern analysis to project a potential bullish price target and speculate how high the stock could go from here.

When applying the technique to Broadcom’s chart, we take the stock’s uptrend from May 2023 to June 2024 and overlay it from the start of last week’s bullish move. This indicates a period of consolidation for several months before a possible rally toward $680 by October next year, if price action rhymes with the prior trend. 

The earlier trend began with two weekly price bars that delivered a combined gain of 27%, compared to the over 20% cumulative advance of the two most recent weekly bars.

Key Support Levels Worth Watching

During potential pullbacks in the stock, it’s initially worth tracking the $250 level. This area on the chart may provide support near the stock’s December and January twin peaks.

Selling below this level could see the Broadcom shares revisit lower support around $185. Investors may seek entry points in this location near the upper range of a consolidation period that formed on the chart between June and November last year.

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As of the date this article was written, the author does not own any of the above securities.