Like many would have expected, Wednesday’s half-day trading session was relatively mellow, with stocks drifting higher throughout the day. The markets will be closed on Thursday for the Fourth of July and will reopen for a regular session on Friday. Also, don’t forget we have a jobs report that day, too. Let’s take a look at a few top stock trades based on Wednesday’s action.
Shares of Symantec (NASDAQ: SYMC ) are surging more than 13% on Wednesday on reports that Broadcom (NASDAQ: AVGO ) is working on a deal to acquire the company. AVGO is big into the M&A game, given its immense cash flow. With SYMC’s slow-and-steady growth and low valuation, it’s a reasonable target for AVGO, even though investors are showing some disapproval, sending shares down by about 4% on the day.
For SYMC, the rally is sending shares through that vital $24.50 area. That’s great news for the stock and if it didn’t have a potential buyout cap tied to it, this would be a must-buy breakout.
But either AVGO is buying the company and there’s limited upside left or it’s not buying it and shares will plunge from here.
With Broadcom stock, though, there’s a decent risk/reward setting up. However, I should mention that this one is tricky. I own AVGO for its low valuation and strong free cash flow, and bought it when its dividend yield was north of 4%. Essentially, I’m in it for the yield and solid fundamentals.
From a pure trading perspective though, there may be better candidates. That’s because the trade-war noise, conflicting reports on the restriction lifts on Huawei and now the potential acquisition of SYMC add more volatility into the stock. Just look at the last few days of action.
In any regard, the stock is holding its 50-day moving average, while its 20-day is trending higher and just below current levels. Further, the $280 level has been notable in the past. If AVGO can hold $280 and its 20-day moving average, bulls can try to ride it back to $300.
If it fails, see if the 200-day acts as support. Investors going long on this setup are risking about $4 per share and are looking for $10 to $20 in potential upside.
The rally has sent shares surging through its 20-day and 50-day moving averages, with some longs looking for a potential squeeze up to the $58 area. This level has been notable in the past, while the 200-day moving average sits just above at $58.77.
So what now?
Investors can either wait for a pullback, perhaps down to its 50-day moving average. Otherwise, let’s watch for a breakout over the $57.50 to $58 area.
The bad news, which we’ll do first, is that CGC continues to put in a series of lower highs and lower lows. This is a bearish technical setup. The good news? CGC keeps attracting buyers in the upper-$30s and despite falling some 8% in pre-market trading, shares are actually positive on the day.
Take it for what you will though, as this one tends to be volatile.
Some investors ignore the chart’s wicks and go by closing prices, which suggests BAC broke out this week (over that blue line). Others do use the wicks and say BAC failed to breakout (still under its purple line).
What’s this “benefit of the doubt” talk? After such positive news, I want to say BAC stock is in breakout mode. For me, a strong stock gets the benefit of the doubt (it broke out), while weak stocks do not (prove it to me and re-breakout again). Unfortunately, BAC does not get the benefit of the doubt treatment from me.
For BAC, I need to see shares over $29.50 to feel confident. Otherwise, I want to see a pullback to the $28.30 to $28.50 area hold for a dip-buy.
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