Broadcom Corporation (NASDAQ:BRCM) ended the last trading session with a solid gain of 5% after it reported the last quarterly results, that beat the market expectations by a fair margin. The volume surged to 20 million against the daily average of 7 million only as the price closed above the previous three weeks’ range.
Broadcom Corporation (NASDAQ:BRCM) reported revenue of $2.06 billion, beating the expectations by $0.05 billion and non GAAP earnings of $0.64 per share, beating the estimates of $0.60 per share. The analysts were estimating a revenue guidance of $2.07 billion but the company issued it at $2.10 billion (plus or minus 75 million). The main boost came from the wireless connectivity business and broadband modem business, with the sales growing by 135 on a y-o-y basis.
Technically, the stock is entering a danger zone though the trend remains up. The long term chart clearly shows that whenever the stock approached the area around $50 levels in the last decade, it faced very sharp rejection. In both the cases, the stock saw an erosion of the value of more than 50%. A break above $50 followed by a sustained closing above that area would change the entire structural picture and would suggest some very significant fundamental change regarding the company. Until that break, the probability of the stock facing large sellers from the band of $47-$50 looks very strong.
The short term chart shows the rally of the last 12 months taking a contracting shape, giving birth to a pattern like a Rising Wedge, suggesting a gradual loss of bullish momentum. The most important support from this context comes around $42 now. The candlestick formed yesterday took the form of Hanging Man, a candle with bearish implications if confirmed by the price action next day. Investors are recommended to book profits at the current levels or at least keep a tight protective stoploss.
