Chart of the Day: We'll 'Wait and See' on This Recent Portfolio Candidate
Following strong earnings, the stock has taken a leg lower and more downside could be in store.
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Some of the more "growthy' names that performed well earlier in the year have lately taken a tumble. One of them is Broadcom (AVGO) , the massive chip company that has built a huge business in AI and other segments of semiconductors.
Broadcom has been around for a few decades and has transformed itself each time to landscape changes. The company often has great margins, offers large buybacks or dividend increases (capital returned to shareholders) and is well-diversified in the tech space.
But all is not well for this great company, and at least the chart is telling us a story. Recent failures to rise above the old highs were witnessed, and with heavy volume as well. This is a sign of institutional selling or distribution and often leads to larger moves down.
Notice the moving average convergence divergence (MACD) is on a sell signal while momentum is clearly lost. The ADX is starting to rise, and during a downtrend that means the concentration is high. In other words, a powerful move could be expected to occur.
Money flow is weak, and the candles are about to turn pink/purple, which is bearish on the GoNoGo composite of indicators.
We had considered adding Broadcom to the Pro Portfolio last week but it seems best to wait and see where the stock lands after it stops going down.
Broadcom is not currently in TheStreet Pro Portfolio and was recently in the Bullpen. We are still keeping an eye on it.
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At the time of publication, TheStreet Pro Portfolio had no positions in any securities mentioned.
