Chipmaker Broadcom (AVGO) has had a busy month. The semiconductor company cleared the $1 trillion market cap level on the way to a record high of $265.43 on June 4. One day later though, AVGO gapped lower by 5%, after the company’s fiscal-year revenue forecast fell short of estimates. The shares have battled back since then, poised to add 1.2% this week and remain a chip-shot from that peak. The good news is that Broadcom stock is flashing a historically bullish combination.
The stock’s recent peak comes amid historically low implied volatility (IV), which has been a bullish combination for the equity in the past. According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, there have been eight different times in the past five years when AVGO was trading within 2% of its 52-week high, while its Schaeffer’s Volatility Index (SVI) sat in the 20th percentile of its annual range or lower — as is the case with the security’s current SVI of 32%, which sits in the bottom percentile of its 12-month range.
Data shows Broadcom stock was higher a month later 75% of the time, averaging a 3% return for that time period. From its current perch, a move of similar magnitude would put AVGO just $264, within striking distance of that record high.
Keep an eye on the $250 level, which could step up as support should it get cleared today. This area was home to peaks in December and January. In the shorter term, a cushion could come from AVGO’s ascending 20-day moving average, a trendline that caught the post-earnings bear gap last week and hasn’t been breached on a closing basis since April, per the chart below.
Puts have been much more popular than usual in the options pits. Broadcom’s 50-day put/call volume ratio of 0.59 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks higher than 91% of readings from the past year. So while calls still outflank puts on an absolute basis, the high percentile suggests the ratio is on an uptick that nears an annual high rate.
Options are an intriguing route. The equity’s Schaeffer’s Volatility Scorecard (SVS) ranks high at 84 out of 100, meaning AVGO has tended to exceed these expectations during the past year — a boon for options buyers.
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