re: This has not been pretty.
I agree. The close below 60, on low volume, indicates that the supply of buyers at 60 is exhausted. If the supply of sellers continues, the stock needs to make another step down (the 4th since the all-time high), to find more value buyers.
I don't think all the momentum guessers are yet out of this stock, they haven't all capitulated yet. Lots of stock changed hands in the 130s and 140s. None of the investors who bought at those prices are value investors. None of them will hold a stock that stays out of favor for months. Weak hands. If the semis and semi-equips rotate out of favor, in the absence of good company news, the stock could step down to the 40s. Consider: the stock has gone from 200 to 60 while the semis were about the strongest sector in the market. What will happen to QCOM's valuation if AMAT and INTC tank? Ugly indeed. I'm holding the stock I bought recently at 60, but I'll wait to buy more till I see where support re-forms.
I'm still trying to decide which flavor of 2003 calls I want to buy if the above happens. Usually, I buy LEAPs at strike prices 30-50% above the stock price, because that gives the best return when a stock doubles or better over the life of the call. However, QCOM options are all very expensive, and there isn't much cost difference between options at different strike prices. Not enough to compensate for the additional risk. For instance, the 40s (ask price for 2003 calls) cost $35 1/2, 17$ of which is time premium. The 80s cost $23 7/8, all of which is time premium. Since I will lose much of the time premium, paying 50% more to get a strike price of 40 versus 80, seems reasonable. That is, if paying 35$ for any option seems reasonable. |
