Once more, Qualcomm (NASDAQ:QCOM) is the “same as it ever was” off and on the price chart. And for QCOM stock bulls, that spells opportunity. Let me explain.
Just when investors thought all of QCOM stock’s legal headaches were done, along comes the Justice Department. I’m referring to Qualcomm’s favorable settlement in late April against Apple (NASDAQ:AAPL) followed a month later by an unceremonious opposing verdict citing Qualcomm’s chip licensing patents business violates Fair, Reasonable and Non-Discriminatory (FRAND) standards.
InvestorPlace’s Dana Blankenhorn does a nice job of describing the nuts and bolts surrounding this most recent development in Qualcomm. It’s worth the read, in my view.
On the price chart, the two announcements were disruptive to QCOM stock, to say the least. Shares of Qualcomm exploded higher by 23% in the immediate aftermath of the AAPL stock news and roughly doubled those gains over the next five trading sessions for a net rally of about 46%. Conversely, on May 22, on the heels of the Federal Trade Commission Act ruling, QCOM plunged by nearly 11% on top of May’s existing broader market, trade-war-driven losses of about 14%.
In summary, the net legal wrangling looks like a victory lap for Qualcomm lawyers on the clock and appealing the decision. And similar to the drawn-out Apple litigation, a decision could take years. But if you look past the courtroom drama and onto the weekly QCOM stock price chart, the technical ruling says bullish investors could be in a winning position if history serves as any sort of precedent.
QCOM Stock Weekly Chart
In truth, the price action of the past month isn’t entirely the same as it ever was. The rally following the Apple news which drove QCOM stock well above longstanding channel resistance quashes that argument. Of course, that price action was good while it lasted. But its failure isn’t the end all, say all either.
Despite shares of Qualcomm failing to hold a couple key Fibonacci levels, prior highs and former resistance channel line during May’s corrective counterattack, the opportunity for contrarian-minded bullish investors is building right here, right now. As the weekly chart illustrates, higher highs and lows are still very much a part of the Qualcomm price chart. That’s bullish as far as QCOM’s uptrend dating back to 2016 is concerned.
But there’s more too.
Entering this trading week, a candlestick doji or hammer-like pattern low has been confirmed deep in value territory at the 62% Fibonacci retracement level. This further builds the case for Qualcomm bulls. However, I wouldn’t buy shares just yet as the weekly stochastics isn’t supporting a technical low at this juncture.
QCOM Stock Trade
My recommendation is to buy QCOM stock above $70.24 as long as the weekly doji low remains intact. The improvised signal is roughly $3, or about 4.5% above Monday’s intraday trading. This entry forfeits some upside in favor of waiting for momentum to build if Qualcomm shares can reclaim their 2014 high and the failed 50% retracement level.
For money management, a stop below $64.24 allows for modest wiggle room beneath the candlestick pattern. This also keeps risk contained to just over 9%. In conjunction with upside potential where filling the gap near $77.50 looks realistic (and even Qualcomm’s recent May high of $90.34 isn’t entirely out of the question), bulls have a winning strategy in the trade war against bears.
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.
