Why and Where You Buy Qualcomm Stock

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Now that it’s 2020 there will be challenges in the stock market to be certain. Still, when it comes to Qualcomm (NASDAQ:QCOM), off and on the price chart the rewards outweigh the threats for buying shares today. Let me explain.

Qualcomm Stock Verdict is In: Buy the Pullback in the Chip Maker's Shares

Source: Akshdeep Kaur Raked / Shutterstock.com

No doubt the market has had an incredible 2019. A broad-based rally emerging from last year’s fourth-quarter corrective meltdown has seen the large-cap, tech-heavy NASDAQ surge by 35% to all-time highs. And Qualcomm stock has been a beneficiary of that strength. Shares have returned an outsized 60% in 2019. But if you think QCOM is finished, think again.

As we enter 2020 the roll-out of a global 5G network is just underway. It’s a game changer. Once unfathomable technologies like artificial intelligence or quantum computing will now have a platform capable of unleashing their full potential. Because of this crucial role, 5G is one of the leading next big things in investing. And Qualcomm stock’s wireless communication chips are at the forefront of this revolution. But that’s not all QCOM has up its sleeve.

QCOM and 5G

As InvestorPlace’s Josh Enomoto notes, Qualcomm is doing more than simply producing the chips to power the 5G network. The company is looking to cash in on how 5G changes our technological landscape by developing new applications for its chips such as facial recognition, which could prove a huge boon for its bottom-line in the years to come.

To be clear, risks exist in owning Qualcomm stock today. Shares of QCOM are historically expensive. Its lucrative 5G-driven modem business with Apple (NASDAQ:AAPL) could vanish, as could its relationship with China’s Huawei. Licensing risks persist. Qualcomm is also facing intense competition in the space. What’s more, even the tiniest of missteps along the build-out of 5G could prove disastrous in capturing this technology’s full profit potential on shares.

All of those worries and more regarding Qualcomm stock have been well-chronicled by my colleagues. Moreover, most of it is simply speculation, no matter how well-intentioned each warning might be. Bottom-line, right now Qualcomm’s business is in the in the “catbird seat,” as Mark Hake wrote last month. And now, so are QCOM shares.

Qualcomm Stock Weekly Chart

Source: Charts by TradingView

A bit more than a month ago, Qualcomm stock was discussed as ripe for profit-taking. Shares of QCOM were overbought and challenging monthly channel and Bollinger Band resistance. The observed takeaway was investors should wait to buy Qualcomm on weakness within the trend rather than attempt to chase shares following an overly-aggressive, earnings-related bid.

The caution in QCOM stock proved spot-on. Less than a handful of weeks later a much more durable-looking weekly hammer tested key support from $75 – $80. Qualcomm’s price action then went on to confirm the bottoming candlestick within its uptrend. Now and following a fast bullish reaction out of the reversal pattern, QCOM stock is in position to be purchased.

After three weeks of consolidating its price gains, shares of Qualcomm are set up in a constructive-looking handle pattern. The small pullback is finding support at the 62% retracement level tied to QCOM’s all-time-high within a larger cup which has developed since earnings.

With stochastics backing up the bullish pattern, I’d recommend buying Qualcomm stock as shares stage a breakout of the handle above $90.46. If QCOM continues to cooperate, taking initial profits at the numerically-pleasing $100 level and possibly during overbought conditions makes ample sense. And to contain exposure on an adverse move, an exit marginally beneath the handle’s low is an equally smart-looking decision off and on the price chart.

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.

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 market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


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