The bullish opportunity in Qualcomm (NASDAQ:QCOM) stock presented itself going into its last earnings report. So, bullish trades in early November paid off quickly. Alas the green on the chart didn’t last, but therein lies the next bullish setup to trade into year-end.
Qualcomm stock is up 48% this year and has a support zone below that buyers can use to achieve higher prices.
In short-term bursts, the stock has rewarded investors with a few rallies this year. But it fizzled often and gave back a lot of its gains. So it is best to trade this stock rather than bet on its long-term potential. This is not the same as dissing the company, but it is merely distinguishing between a trade and an investment. Today I will examine the shorter-term opportunities that fall under the trading aspect.
First we must acknowledge the macroeconomic environment. The bulls are clearly in control since the indices are setting new highs in spite of the bad headlines and the threats that still linger. The trade war with China still remains, but the difference is that the safety net from the Federal Reserve is out in full spread. Chairman Jerome Powell stated that the Fed won’t raise rates for a long while, even if inflation heats up.
Looking ahead, the bulls have the overall edge in equities. This helps QCOM’s upside opportunities.
Qualcomm Hasn’t Reached New Highs
Source: Charts by TradingView
While the S&P 500 set a new all-time high, Qualcomm stock is still struggling to reach one of its own. The $100 absolute high from the dot-com bubble persists. The company did, however, exceed the monthly closing high.
The good news here is that the bulls have support near $80 per share. This has been a pivot level for a long while. Back in July it marked a sharp top, and then served as a top six more times. Finally, buyers broke out from the level in late October and now can use it as forward support. Often enough prior resistance becomes the neckline that supports forward upside price action.
So if you are already long QCOM stock, I would recommend staying in as long as prices remain above said neckline. In addition, if the bulls can take out $86.50, then they can invite more buyers to trigger a pattern to target $91.40 per share. There will be resistance along the way, especially near $88.50. Again, the idea here is to trade the price action and not get emotionally attached to the stock.
If QCOM stock falls below $83, then the bears can start gathering steam and foil this setup. Worst case scenario is if it not only fails to fill the upside potential, but also loses the $80 pivot. Then the downside scenario would be $5 below that. This is not a forecast of doom, but it is a scenario that exists. I am trying to highlight the importance of labeling this a trade opportunity, not an investment.
Fundamentally, QCOM stock is somewhat cheap with a trailing price-to-earnings ratio of 24 and a price-to-sales ratio just over 4. However, it is not an emphatic bargain. There is always room for shedding froth given the right circumstances.
Technically, the bulls have a tailwind as most of the oscillators and moving averages still suggest that there is more upside in the stock. The experts also agree that the current price is lower than it should be — yet almost half of them still don’t have Qualcomm stock as a “buy.” Therein lies the potential upgrade headlines.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here.
