The coronavirus is a big deal on more than a few levels. But the even bigger deal for Qualcomm (NASDAQ:QCOM) stock are critical supports found off and on the price chart. And while investors don’t have to be as fast as the speed of light, it is time to put QCOM shares on the radar for buying. Let me explain.
As any investor with a passing interest in the stock market is aware, as well as non-investors for that matter, it’s been a historically ugly few weeks on Wall Street.
Of course, all fingers have been pointed at the coronavirus pandemic as the major averages quickly tumbled from February’s all-time-highs into a full-fledged, very grizzly bear market. And unsurprisingly, Qualcomm stock hasn’t proven immune to the fallout.
At its worst, the correction has shed nearly 36% from the broad-based, large-cap S&P 500. The tech-heavy NASDAQ has cratered slightly less. Still, its decline of about 33% has also easily eclipsed the 20% admission gate into bear market territory.
At the same time, shares of Qualcomm have fallen as much as 39%. But rather than be fearful, now is a time for investors to be optimistic and act opportunistically. Bottom line, catalysts off and on the QCOM price chart point strongly at the chance to pick up shares for a very favorable discount.
That’s right, investors should be considering the purchase of Qualcomm stock, not selling.
Good Fundamentals and 5G Tailwind
Business-wise, Qualcomm is in strong position to profit from last year’s launch and continued roll-out of the global 5G network despite the coronavirus. While the US has yet to feel the worst of the pandemic’s impact socially and economically, China and the rest of Asia are already in the process of ‘coming back online’ following their COVID-19 outbreaks. That’s important, but that’s not all either.
The other fact is Asian markets have been forceful adopters of 5G. As much, investors can expect the company’s licensing and chip business to grow strongly as those economies continue to put out the proverbial ‘open for business’ signs on the front door once again. Moreover, it’s not hard to appreciate that in the wake of the coronavirus, an even stronger secular trend towards increased mobile device usage and in turn, more robust growth for Qualcomm will result.
Now and with Qualcomm trading at a much more reasonable valuation, room for upgrades given the stock’s fairly large ‘hold’ recommendation of 43% and a price chart that can ‘level’ the playing field for investors, the time is right to consider shares for a spot in the portfolio.
Qualcomm Stock Weekly Chart
Source: Charts by TradingView
On the price chart Qualcomm stock’s aggressive correction has landed shares into a test of layered price support. Specifically, four ‘levels’ of key Fibonacci support dating as far back as 2002 have been challenged with the decline. A cluster of this many Fibonacci levels is definitely compelling. In our view, it’s a gift, without being a sucker’s bet. But there’s more to QCOM as well.
Despite the larger drop in percentage terms relative to the broader averages, Qualcomm also remains in an uptrend. Shares are well north of the low formed during the last significant market correction in late 2018. The same can’t be said for either the NASDAQ or S&P 500. And in our observation, it’s another sign pointing towards relative strength and market out-performance in the months ahead.
To be clear and given an extreme rally off the broader averages bear market lows, I don’t believe investors have to be as fast as the speed of light or 5G in hitting the buy button on QCOM. At this point I’d actually propose waiting for a high-powered market-based follow-through day to emerge in the coming days. In our view a FTD is more important to the market and Qualcomm stock’s fate than the coronavirus, the FTC or Apple (NASDAQ:AAPL) for that matter.
Disclosure: 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.
