Yo Pit Crazies,

Below is the chart for the old Broadcom Corp (Ticker: AVGO) chip stock. I remember trading BRCM in the late 90’s when their chips were changing the internet or cell phones. They were scooped up by AVGO to create the chip behemoth it is now.  

BRCM as a ticker got laid low in 2002 when the Dot Com boom crashed, but a buyer back then would have made a large fortune by now:

AVGO 3 Month Chart

The market we have is dominated by a few names that likely will benefit or own the market for high speed chips for AI in the short term. Just like buying the broader market in 2002, there were a lot of bargains there. 

As a trade, AVGO could see $1000 after earnings with the right hype on the earnings call, but it’s hard to make an investment at this level.

Remember the Tech Wreck in 2018? There’s usually a time to buy tech when no one wants them.

Let’s look at some areas that could rebound into 2023.

Will AI Riches Spill Over Into Any Other Sector?

There’s no doubt the internet benefited companies that were not internet companies eventually.  Productivity exploded for 20 years afterward and I have little doubt that will happen again. What I would like to see are some signs of life in the broader market.

The chart of KBW Regional Bank Index (Ticker: KBW) is not in the basement but still has not recovered.  Investors would rather pay rich valuations for growth than cheap valuations and the risk of insolvency.

The rip trades in AI stocks are generating the volumes and the press right now. It will stay hot for a bit with BRCM as the last big ticker this earnings cycle. For the AI rallies to keep going, some good news has to spur the rest of the market in my opinion. AI companies need someone to sell too.

Some Debt Ceiling votes are going down this week. Should be illiquid and a good time to pick up bargains. The SPDR S&P Regional Banking ETF (Ticker: KRE) is not a bad place to start with a protective put in place. 

I like to add International Business Machines Corp (Ticker: IBM) as well.

The Rundown

Big Money Flow

Equitrans Midstream Partners LP (Ticker: ETRN) Oct20 6 calls closed for a 292% gain with 100k calls bought in the Oct cycle. Mark and I jumped on these calls last week as it was the first winner from the Debt Deal since a new pipeline was greenlit.  

Power Income Trader

Intel Corp (Ticker: INTC) Jun16 28.5/29  call vertical spread closed for a 97% gain

Win the Week

SPDR S&P 500 Trust (Ticker: SPY)  2/6/4 Jun02 420/413/406 put butterfly closed for a 88% gain

To Your Trading Success,

AG