This chart looks just like Nasdaq before it broke out

Dell just paid me a 98% winner this morning.

I closed the last of my position, flat going into tomorrow's earnings. 

The stock has nearly tripled in four months. 

The thesis was not complicated. 

It was relative strength 101. 

I was looking for tech to outperform out of a low, the way it always has historically, and Dell was the name showing me that strength before the rest of the tape caught up.

I scaled out as the chart strengthened and the base built. 

That is what I mean when I talk about price and time. You need the chart to confirm the move, and you need the cycle to agree with it. Get both, and the move usually pays you for it.

Now the question is where I am looking next.

Broadcom Looks Like the Nasdaq Did Before the Breakout

Broadcom is trading at $421.48 as I write this. The stock made an all-time high of $442 about two weeks ago, and it has been chopping sideways underneath that level ever since.

That sideways action is not weakness. 

It is the chart resting after a hard run, which is exactly what you want to see before a stock makes its next leg higher.

Pull up the Nasdaq from earlier this year, right before it broke out to new highs, and put it next to Broadcom right now. They look almost the same. A multi-month run, followed by a quiet base near the top.

That is the setup I am watching.

Why This One, And Why Now

The rotation in this market is real, and you can see it on the screen this week. Names like AMD, Google, and Nvidia are pausing. Money is leaving the stocks that have already run hard, and it is moving toward the ones that are quietly building bases for their next leg.

Broadcom is in that second bucket. 

It has run, but the chart is telling me the run is not finished. It is regrouping.

The other thing to be mindful of is that Broadcom reports earnings on June 3rd. 

That is a near-term catalyst, which means the chart will either confirm the breakout or invalidate it within the next week. Either way, you learn something soon.

The level I am watching is $442. 

A break above that on volume is the move I am looking for. If it fails there and rolls back into the base, I let the chart show me what it wants to do next without forcing a position.

I am not putting a target on it today, because I do not need to. The chart is going to tell me where it wants to go, and I would rather follow it than predict it.

That is the whole point.

— Gianni Di Poce

P.S. I’m placing these trades in Trinity Trade. Right now, we are running a special offer. If you’d like to learn more, click here to speak to one of our reps.