Increasing difficulties off and on the Qualcomm, Inc. (NASDAQ:QCOM) chart suggests it’s time for bearish traders to reload positions in QCOM stock with another well-positioned and limited-risk wager on lower prices ahead. Let me explain.
Back in early March this strategist discussed fading a rally in QCOM stock inspired by product ties to Microsoft Corporation (NASDAQ:MSFT) and its cloud platform. Ultimately, investor cheer seemed more of a temporary fleecing of bears within Qualcomm’s larger trend of serial disappointment for investors.
A handful of weeks later, shares are lower and our presented spread captured its full profit potential of more than $2 for a return approaching 450%. But in our estimation, the bears aren’t finished yet beating up on QCOM stock.
Truthfully, it can be tough to call a spade a spade at times. But worse is not listening to the market. And in the situation of Qualcomm stock, investors are saying it’s a company in increasing trouble and one not likely to simply bounce back from here.
Most of Qualcomm’s problems, as InvestorPlace’s Tom Taulli recently noted, stem from the company’s lucrative licensing model. It’s one which finds itself battling increased and expensive litigation aimed at proving Qualcomm is “engaging in unfair practices”; and it appears to be gaining traction at QCOM stock’s expense.
If you think this is a small matter, think again. As also addressed, a full 40% of Qualcomm’s revenues come from just two customers — Apple Inc. (NASDAQ:AAPL) and Samsung Electronic (OTCMKTS:SSNLF). Bottom line, if anything was to happen with either golden goose, a discounted and inexpensive-looking QCOM stock sporting a nice dividend could actually wind up a very poor investment.
Lastly, considering Apple isn’t just sitting idly by and has already filed its own lawsuit for $1 billion in damages against Qualcomm’s business practices, it’s our view the case against a fairly bearish-looking QCOM stock chart is building and worth respecting as well.
QCOM Stock Daily Chart
Back in early March, I wrote about QCOM stock’s technical price action as taking on the shape of a bearish flag pattern following a large and technically destructive loss. There was some evidence to support the bull case, but I personally didn’t have enough reason to think a bottom was in.
It turns out after a modest bump higher, the MSFT story fell to the wayside and so did QCOM shares. Now, with shares roughly 9% lower, I still don’t believe Qualcomm has bottomed.