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Best-of-Breed Semiconductor Bound for New Highs

by | Sep 25, 2021

Broadcom (AVGO) consolidating in a multi-week range under $510.50 and new highs while holding the recent re-test of the 55-EMA. Shares are above monthly value and positive medium- and long-term trends are well intact, so potential for a breakout continuation and move to $530-$540 is in play. The SMH is also starting to work higher above monthly value and strength in the group would be a nice tailwind. AVGO has been in a narrow weekly band since February and holding above $495 would confirm the move and start a much bigger leg higher. The options market has been bullish since late August in the name with buyers in the November, December, June 2022, and Jan. 2023 calls. The most notable trade was on 9/22 with a buyer of 1,500 December $510 calls for $3.2M and currently pricing about 5% below the initial buy. Put sales are also popular with size in the April and June options around $370 and $340.

Trade to Consider: Long the AVGO November $520/$540 call spread for $6.50 Debit

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