Forget Nvidia, This Stock Is the Key to the Market’s Next Move
Broadcom has joined Nvidia and AMD as the latest AI chip stock to get chopped, but here's the most important name to watch right now.
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Last week, we decided to hold our Broadcom (AVGO) position into earnings. This was a departure from our recent decision to take partial profits in AI chipmaking stocks Nvidia (NVDA) and Advanced Micro Devices (AMD) .
Why stick with Broadcom into earnings? The stock closed at an all-time high on December 10, and received a price target upgrade from Swiss banking giant UBS. All of this happened ahead of earnings.
In the end, none of those things mattered. Broadcom easily beat analysts’ estimates for earnings and revenue, but Wall Street was displeased with the company’s forward guidance. There were concerns over short-term pressure on margins, due to competition.
Down 17% From the Highs
As a result, Broadcom has now lost 17% since its December 10 high. The stock has broken a major bullish trendline (black dotted line), which had been intact since April, and is now trading below its 50-day moving average (blue).
Due to this selloff, I’m trimming my Broadcom position by 50%, just as we did with Nvidia and AMD.
Do I wish I’d taken this action last week? Yes, but this is far from a disaster. Broadcom is still up by 46% year to date. One year ago, we recommended Broadcom at $180. Since then, the stock has gained 88%, even after this week’s drawdown.
We also recommended the stock at $244 back in June, after it flashed a technical buy signal. If you bought Broadcom back then, you’re still up by 39%. Despite everything that has happened,
I still prefer Broadcom over Nvidia and AMD. One year ago, I explained how Broadcom could steal Nvidia’s crown.
The Key to the Market?
What's happening in the markets is bigger than Nvidia, AMD, and Broadcom. There are concerns about the entire AI space right now. Some of the other big AI names have charts that are downright alarming.
Oracle (ORCL) closed at a six-month low on Monday, and is now down 43% since June 11. We took a loss on this stock recently. Oracle’s failed rally was something of a turning point for AI stocks, as it poured cold water on what had been an extremely hot sector.
Meta Platforms (META) has a similarly disturbing chart. Like Oracle, Meta is trading below both its 50-day (blue) and 200-day (red) moving averages. Both stocks have a declining 50-day MA.
But if you're looking for the key to the market’s next move, it’s Microsoft (MSFT) . Mr. Softee is barely hanging on to its 200-day moving average (red).
Microsoft formed a double top (points A and B), and the key support for that formation was $492.50 (black line). Now that line is acting as resistance (point C).
Microsoft has failed on several occasions to break above $492.50. If it loses the 200-day MA (red), currently just below $475, Microsoft would weigh heavily on the major indexes.
At the time of publication, Ponsi was long AVGO, NVDA, and AMD.
