Some option players are anticipating the technical bounce in Broadcom (AVGO) and buying August out of the money calls. The pros like these contrarian trades, but are they a little early?
Below is our customized chart and its proprietary signals that help traders improve their timing, also investors if they decide to bottom fish AVGO. Let's go to the traders first. Traders are looking at our short term Demand/Supply signal on the chart below. You can see Demand dropped into Supply well before the CA (CA) announcement. (Maybe someone knew the announcement was coming.) That's history and we are interested in trading the future, the August call options. What is Supply telling us on the chart below? It is too early to play the technical bounce. We have to wait for Supply to turn up. That is the earliest signal for a trader and it may still be too early. Most traders will wait for Supply to turn into Demand. Traders hate risk and love sure things.
Investors who want to bottom fish also want to avoid getting in too early and would like to catch the bottom. On the chart below they are watching our overall fundamental and technical grade. As you can see the grade dropped from a passing grade to a failing grade well before the CA announcement. Someone knew something because our long term grade indicator is for investors and is not suppose to move like Demand/Supply our short term indicator.
Using the chart below, we are willing to trade any technical bounce, but we wait for the signal to do this. We will wait for Supply to turn up and start improving on this daily chart. Maybe buying out of the money call options in August is the way to go, but we won't guess, we will just wait for the signal.
NOTE: See our free annotated charts and footnotes at stockcharts.com/public/1792807SID2018 model portfolio:https://www.marketwat...ALSO: check our trades athttp://stocktwits.com...Disclaimer: We are not investment advisers and we never recommend stocks or securities. Nothing on this website, in our reports and emails or in our meetings is a recommendation to buy or sell any security. Options are especially risky and most options expire worthless. You need to do your own due diligence and consult with a professional financial advisor before acting on any information provided on this website or at our meetings. Our meetings and website are for educational purposes only. Any content sent to you is sent out as any newspaper or newsletter, is for educational purposes and never should be taken as a recommendation to buy or sell any security. The use of terms buy, sell or hold are not recommendations to buy sell or hold any security. They are used here strictly for educational purposes. Analysts price targets are educated guesses and can be wrong. Computer systems like ours, using analyst targets therefore can be wrong. Chart buy and sell signals can be wrong and are used by our system which can then be wrong. Therefore you must always do your own due diligence before buying or selling any stock discussed here. We assume no liability for erroneous data or opinions you hear at our meetings and see on this website or its emails and reports. You use this website and our meetings at your own risk.
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Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in AVGO over the next 72 hours.
Additional disclosure: Our signals and views on AVGO were previously published to paid subscribers.