How to Trade Qualcomm Stock as It Eyes $100

Keep it simple and play the trend with bull puts

Twenty years ago, Qualcomm (NASDAQ:QCOM) reached $100, the magic century mark. The tech bubble was in full swing, and internet stocks were sizzling. Then came the fall. Qualcomm stock fell some 90% and has spent the past two decades trying to reclaim its former glory.

Source: JHVEPhoto / Shutterstock.com

And it’s just about done it.

Last quarter’s earnings-inspired jump pushed QCOM stock to $94.11, bringing it a few bucks short of its long-lasting peak. But with the positive earnings growth and technicals at its back, I think a touch of $100 is in the cards this year.

Let’s break down the price action from top to bottom and highlight the trends and levels that matter moving forward.

Weekly Time Frame

Source: The thinkorswim® platform from TD Ameritrade

Qualcomm has taken shareholders on a wild ride over the past five years. Drops and pops, whoops and whirls, they’ve seen it all. This past year was the year that healthy price action returned. The weekly time frame carved out a series of higher pivot highs and lows to finally give trend traders a reason to pursue QCOM stock.

With that, the 20-week, 50-week and 200-week moving averages curled higher and have been climbing ever since in support of buyers’ newfound dominance.

The stock now finds itself in a range between $80 and $94. A break of either level will signal the direction of its next swing. Because of the powerful uptrend in place, I’m betting it will be to the upside.

Daily Time Frame

Source: The thinkorswim® platform from TD Ameritrade

For more granularity, we can zoom in to the daily view. The posture of the moving averages mirrors that of the weekly with the 20-day, 50-day and 200-day all rising steadily. I particularly like how buyers stepped up to defend the 50-day each time it was tested over the past month. In the short run, a pair of topping tails have formed, showing we are encountering selling pressure near $92.50.

This is the spot that Qualcomm shares had trouble breaking through in November, so it shouldn’t be all that surprising that bears are emerging again. At this stage, you either have to wait for a better pullback toward $87.50 or play the breakout above $94 resistance. Or, you can create a cash flow play using options.

On the volume front, we haven’t seen a whiff of distribution in a month, so I don’t see any warning signs of note.

Recommended Qualcomm Options Trade

Implied volatility is creeping higher ahead of the company’s next earnings report. The elevated risk is inflating premiums and increasing the appeal of strategies like bull puts. Tack on the tech sector’s ridiculous relative strength and I think bull puts are worth a shot for QCOM.

Sell the Feb $85/$80 put spread for 90 cents.

Consider it a bet that QCOM will sit above $85 at expiration. Your max reward is $90, and the max risk is $410.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here!


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