EOT Trade Alert – July 23, 2010

| July 23, 2010

July 23, 2010

Trade Alert:

   Buy BRCM November $39.00 Calls at $2.60 or better

Company Background:

Broadcom (BRCM) makes semiconductors for wired and wireless communications equipment.  Their products allow voice, video, data, and multimedia to be delivered to homes, businesses, and just about anywhere you can get cell phone reception.

Short-Term Catalyst:

Someone forgot to tell BRCM stocks are out of favor with investors.  This stock is absolutely on fire right now.  And I don’t see it slowing down anytime soon.

BRCM’s continued to rocket higher while the majority of US stocks are stuck in neutral. Since the flash crash on May 6th, the S&P 500 has chopped its way lower.  It’s a full 3% lower today than it was 11 weeks ago.  But BRCM has rocketed up a whopping 15% in the last 11 weeks!

In fact, BRCM just set a new 52-week high of $37.79 last week.  And I think we could see BRCM trade all the way up into the mid-40s.

The impressive run is being fueled by massive growth in revenue and earnings.

Revenue is expected to grow by nearly 43% this year alone.  And earnings were up an unbelievable 612% last quarter from a year earlier!

The company has a great track record of delivering better than expected earnings. And the stock usually gets a nice pop following their earnings release.

Let’s grab these options now before BRCM releases another monster quarterly earnings.  It’s scheduled for Tuesday, so we need to move fast.

Keep in mind, this isn’t just a short term earnings play.  I think BRCM will continue to rocket higher over the next few months.  That’s why we’re buying options with a November expiration.

Trade Details:

Underlying Stock Symbol: BRCM
Current Bid-Ask Price: $2.43 – $2.47
Option “Buy Up To” Price: $2.60
Break-Even On Stock At Expiration: $41.60
Maximum Risk Per Contract: $260

Exit Strategy:

BRCM is trading at $37.14 per share.  Resistance levels will be at $40 and again at $45.  Remember, we want this stock to move higher.  Support levels will be at $32 and $29.  Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.



Category: EOT Trade Alert

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