Broadcom has missed the big chip rally, but that may be about to change

Broadcom shares haven't acted very well as the rest of the semiconductor space surge, but that may be about to change.

While Broadcom has risen a little over 2 percent this year, its gains pale in comparison to that of the SMH, the chip stock-tracking ETF that's surged over 13 percent in 2018.

Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, told CNBC's "Trading Nation" that the stock could be poised to catch up. Here are his reasons why.

• After the Trump administration squashed the company's potential deal with Qualcomm in mid-March, the stock initially rallied to its highest level of the year, then changed directions. The stock at this juncture hasn't managed to recapture those highs, and has underperformed the broader chip group.

• Technically, however, Broadcom has built a solid foundation at $230 per share (its 2018 low). If it can break above the key $270 resistance level, $300 could quickly follow. If investors once again buy into its growth story, the stock could rise quickly.

• The company is a principal supplier to the wireless industry. J.P. Morgan estimates the chipmaker will generate $10 in revenue from every Apple iPhone, but therein lies the rub. Investors are clearly concerned that smartphone sales have slowed, and that the slowdown could have negative implications for Broadcom sales.

• Still, Wall Street is upbeat about the stock. Analysts' average price target on Broadcom is $310.41, according to FactSet, implying nearly 18 percent upside from current levels.

Bottom line: Broadcom has largely sat out the big chip rally amid deal talks this year, but the stock could be poised to catch up, according to Schlossberg.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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