Buying Broadcom(AVGO) bullish trend Hey guys,
Now is a great to buy the recent dip in Broadcom as the upward trend is still in place and is holding support not too far below at the 50day & 200 day moving average. The company just released earnings and the stock didn't have much of a reaction (besides selling off just like the majority of the market). I like to trade these steady/slow winners with stock options because a small % percentage win can be worth alot more with long call options.
For today, we can buy the January 2020 strike 280 call for $23.60 per contract. That contract will allow us to trade 100 shares of AVGO for $2,360 investment. If the stock returns to the $300 per share, this option will make atleast 10% in 1.5 months, and if the stock jumps within the next two weeks, we can make 20%-30%. As with all investments, their is risk. The immediate risk is that the stock could retest the 50/200 day moving average which would be a minimum of -20%. However, with our option we have 4 months for the stock to move approximately 5.5% in our direction. That 5.5% is deceiving though because you can choose to sell your option at any point. If the stock jumps 3% tomorrow, you'll be making a nice profit. You may want to sell/ hold or trade for the big trade if your trading a breakout to all time highs.
The big trade can work, although the odds are against you. But with good timing, you can make good, medium gains in the 30%-35% which are my favorite. For example, for me to make 30% and giving my options less than 2 months, I need the stock to reach $305 per share. Just 3 days ago, the stock was at $301 and all I will need is a bounce back to retest its high and go up just 1%. So in essence, it could go to $305 within weeks and not months.
Other info:
1) RSI for the stock is at 56 which is slightly bullish, but not overbought. So it has room to go higher.
2) Volatility of the stock options just sold off because of stock earnings. With volatility being cut almost in half, buying calls are preferred. Currently, IV rank is at 28%.
3) Stock touched the 50 day moving average yesterday. So in essence, we're buying it cheap over the lasts 50days.
4) Lastly, Broadcom may have a technical wedge breakout. With a breakout, the stock could easily break higher to retest all time highs at $320 a share. If that happened over the next 4 months, this option would be worth + 85%. Now I don't try to hit the big winners, but if I do, I will gladly take it.
Thanks for reading.
