While one truce has been declared and Qualcomm (NASDAQ:QCOM) stands to be a major beneficiary, on the QCOM stock price chart, it’s time for bulls to stand their ground and wait for better prices. Let me explain.
The week literally and figuratively started off on a high note for QCOM stock. Shares of Qualcomm opened up 6% out of the gate Monday following this weekend’s negotiated tariff truce between the U.S. and China. Importantly, sanctions against China’s Huawei will also be eased. Yet, by the close of trade, QCOM’s intraday gains were limited to just 1.92%.
So, what went wrong with the rally in QCOM stock and semiconductor peers like Intel (NASDAQ:INTC) and Broadcom (NASDAQ:AVGO) which also have substantial exposure to China and Huawei? On closer inspection, investors are approaching the truce and what it means for these stocks, more skeptically.
Bottom line, trade talks have been known to collapse. As well, even if an actual and full-blown trade deal is reached, most experts are in agreement that a resolution will be a long time coming. Wall Street is also questioning how the eased ban with Huawei might actually play out given the U.S. government’s efforts to protect its homegrown technologies.
The good news is with so much uncertainty still in the mix, there’s always the QCOM stock chart to look at for clues.
QCOM Stock Weekly Chart
This past spring, QCOM stock forged ahead with a decidedly bullish change of character. Prior, shares had been channeling lethargically higher for a couple years when a legal win against Apple (NASDAQ:AAPL) sent Qualcomm stock rocketing above multiple layers of resistance.
As quickly, a move by the Justice Department looking into Qualcomm’s business practices and May’s ubiquitous market correction sent QCOM stock plummeting. But shares managed to find a meaningful low without reverting back to its former ways. May’s hammer pattern bottom found support from the 62% retracement level and prior congestion highs from October 2016 to February 2018. In our view that’s bullish for QCOM. However, I wouldn’t be a buyer of shares today.
Since establishing its technical low, shares of QCOM stock have rallied smartly, but they’ve also moved very quickly. And following Monday’s exhaustion-style bid which tested the 62% retracement level from the Apple-induced high to May’s low, Qualcomm looks ripe for a pullback.
My recommendation is to put Qualcomm on the watch list for purchasing below $75. My best guesstimate is for a low to form in an area from roughly $71-$75. This zone is backed by QCOM stock’s January 2000 all-time-highs and last September’s brief penetration of that price level. And closer to the action, a welcome pullback of this magnitude would roughly retrace 38% to 62% of Qualcomm’s latest rally and test prior channel resistance for support.
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.