Broadcom's AI Surge: Key Price Levels to Watch

Broadcom Inc. (AVGO) shares have been on a tear, surging on strong AI sales growth and a rosy outlook. The chipmaker reported better-than-expected earnings and issued a bullish outlook, sending the stock soaring in extended trading. As Broadcom's stock price continues to climb, investors should keep an eye on key price levels to capitalize on potential pullbacks.

Broadcom's fiscal 2024 AI revenue more than tripled, driven by its AI XPUs and Ethernet networking portfolio. CEO Hock Tan expects significant AI opportunities over the next three years, with accelerators and networking sales in fiscal 2027 ranging between $60 billion and $90 billion. This bullish outlook has fueled investor enthusiasm, with the stock rising 14% to around $206 in extended trading.

Technically, Broadcom shares have been consolidating within an ascending triangle since mid-June, a chart pattern that signals a continuation of the stock's longer-term uptrend. The price is poised to break out above the formation's top trendline on Friday, setting the stage for further upside. The relative strength index (RSI) gives a reading just above 50, confirming bullish momentum and indicating the shares have ample room to test higher prices as they move into price discovery.

To forecast an upside price target, investors can use the bars pattern tool, which analyzes prior trends to help predict future directional moves. When applied to Broadcom's chart, the tool extracts the stock's trend higher from December 2023 to June this year and repositions it from the ascending triangle's top trendline. This projects a longer-term upside target of around $315.

During pullbacks, investors should initially watch how the price reacts to the $185 level. This location on the chart would likely attract buying interest near the ascending triangle's top trendline, which may flip from an area of prior resistance into future support. Selling below this level could see Broadcom shares revisit lower support around $140, an area where investors may seek buying opportunities near a horizontal line that connects a series of comparable trading activity on the chart between February and September.

In summary, Broadcom's strong AI sales growth and bullish outlook have fueled investor enthusiasm, sending the stock soaring. Technically, the stock is poised for further upside as it breaks out of an ascending triangle. Investors should watch key support levels during pullbacks near $185 and $140 to capitalize on potential buying opportunities.