Anatomy of a Great Trade: Two Small Losses For Some Huge Wins (AVGO)

by | Sep 29, 2023

Back in the early 2010s, Broadcom (AVGO) was just another semiconductor IPO. 

Semiconductors weren’t as hot then as they’ve definitely become now, but the IPO did okay. At least it didn’t fall off a cliff like many IPOs do.

In August 2010, the 12-month simple moving average (SMA) finally printed for the first time on our chart. 

From there, instead of worrying about financials, market conditions, or pundit predictions, we simply waited for it to drop below the SMA and then give us two consecutive closes above the SMA. 

In March 2012, we finally got it.

And it sputtered out.

Guess what? IPOs do this all the time. 

Then we got another trigger in August 2012.

Again, it moved back below the SMA for a loss. 

Maybe this method doesn’t work. I’ll just give it one more try…

In July 2013, we got another trigger.

And holy moly:

It skyrocketed from $37.85 to $233.83.

If we were able to take the first two stopouts of -14% and -10%, we were then treated to a 500% winner.

And, by the way, AVGO has continued to produce winning trades, including a current one that would’ve entered at $565 in January 2023 (AVGO is currently trading at $836):

Happy trading,

— Scott Welsh

P.S. As a reminder, these plays are based on my longer-term Weinstein Stage Analysis method. The charts above use monthly candles and a 12 month simple moving average. For details on this method, see my explanation on this Ask The Pros episode starting at timestamp 20:45.

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