Some may see Qualcomm (NASDAQ:QCOM) as having an albatross around its neck. But on the price chart, other traders dismissal of Qualcomm stock looks like a big mistake and opportunity for contrarian-minded bulls. Let me explain.
The case for owning Qualcomm stock — or selling it, for that matter — isn’t exactly closed in the eyes of many investors. I’m referring of course to the company’s high-profile ongoing legal wrangling with Apple (NASDAQ:AAPL).
The implications of a verdict against Apple could prove huge for QCOM bulls and bears alike. As InvestorPlace’s Vince Martin notes, Qualcomm’s entire operating model is at stake — and in tow, margins, profits, pricing power and whether a 24/7 legal team will be needed indefinitely.
But I’m bullish on Qualcomm stock right now.
Many investors see the Apple issue hanging over Qualcomm or the company’s overdependence on a saturated smartphone market as reasons to avoid QCOM shares. Still, if stocks are leading indicators of what happens off the price chart, I’m seeing strong signs a verdict has been reached for contrarian investors to go long Qualcomm stock.
Qualcomm Stock Weekly Chart
On the weekly time frame, while Qualcomm stock hasn’t exactly set the market on fire with its price performance, we can see that shares are nonetheless in a bonafide uptrend since 2016. What’s more, QCOM is at a price point which, if history is any sort of indicator, has proven to be a trigger for aggressive moves up and down within the larger bullish pattern.
If investors look at multiple highlighted ovals QCOM does appear to have more than its share of wider range reactions through the current share price. Why has this spot on the price chart proven to be so pivotal within the uptrend? I don’t know.
What I am certain of is if we zoom out the price action a bit, Qualcomm stock is clearly favoring the bulls once again and pointing to a strong reason to go long shares.
Qualcomm Stock Monthly Chart
On the monthly chart of Qualcomm the uptrend which began in 2016 following a two-year long correction is hinting strongly another higher high within the pattern is on track.
February’s test of channel support was the latest to coincide with the support of a bullish stochastics signal. That’s good news for QCOM stock, even if there’s no good news yet off the price chart. Further, with the most recent high near $75, that’s plenty of upside to reaffirm the trend within a Qualcomm stock that’s trading sideways to others.
Lastly, the bullish case is made a good deal more compelling when appreciated in conjunction with the key or pivotal level discussed earlier and which shares of Qualcomm stock are testing today.
Qualcomm Stock Trade
For traders who are agreeable with the presented bull case, I’d recommend buying Qualcomm stock through $58.61. That’s this past week’s high which narrowly cleared the key inflection level, as well as confirmed the March candlestick’s rally off technical support.
To better manage exposure in QCOM, below $56 looks like a good spot to cut any potential losses. This exit allows for some wiggle room beneath a pair of failed weekly bearish hangman candlesticks, while also keeping risk contained to less than 4%.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.
