JR, I've done some more thinking about QCOM since you asked me about it. I'd like to add to my commentary if you don't mind. To get a clearer picture of QCOM, I think it's important to check out the XTC.
Here's a weekly chart to help with the intermediate term:
stockcharts.com[h,a]waclynmy[pb20!b10!b50!f][iut!Ub14!Lh14,3!Ud20!Lj[$spx]]
The weekly chart shows the XTC just now approaching oversold on the Relative Strength Indicator. The RSI measures 30.1 and and anything under 30 represents oversold.
The CCI Indicator is another momentum indicator. Anything below -100 represents buyers have left the building. At -166, it can go to -200, -300, etc.
The candlestick pattern is sitting on 800 and indicates there's more downside to come.
The Stochastic Indicator shows oversold as both lines are below the 20 line.
What is significant here is that the XTC has bounced from this level every time it's visited here. However, the candlestick pattern doesn't show any sign of a reversal pattern, indicating the XTC doesn't bounce this time.
If the XTC doesn't bounce from here, it'll search for a level of support. That support level can't be seen on this chart, it's too far back. The "condition of the market" suggests you may see the XTC drop another 100-150 points from here.
What does this have to do with QCOM?
Everything actually! QCOM and the XTC are in a bearish trend. It's going to take a lot of buyers to change that trend. You'll need a strong catalyst to turn things around since the fundamentals in the telecom sector are out to lunch. I offer a two part plan.
QCOM will suffer with the sector. You're going to need momentum to move this stock, in my opinion. What would it take to get that momentum going?
1.) I think the XTC needs to get down to the 650 neighborhood to attract the bottom feeders. I think it would be asking too much to expect momentum investors to show up at this point. There is a point where it'll become attractive to them and I think another 100-150 points lower is the price they'd be willing to pay. As the XTC bottoms and starts to recover, QCOM will be one of the primary benefactors from such a move.
2.) QCOM on it's own merits would have to cross up and over a major moving average. If QCOM can cross up above the 50 day moving average for example, I think that would solidify that QCOM has the strength to continue on its own. The 50 day MA on the daily chart is 60.98. I know that's a long way off from where QCOM sits today, but it'll come down and I'm assuming it's not a short term trade you're interested in.
2A.) You could buy in pieces, each piece as QCOM crosses up over a moving average, 10 day, 20 day, 50 day, etc.
The vulnerability of the telecom sector warrants such caution, in my opinion. I'm sure there are other ways to play QCOM, but this is one worth considering.
The above is humbly presented, my opinions, and I could be wrong. In this type of market, it's better to be wrong on the side of caution and be able to fight another day. Other opportunities will come along. They always do.
dabum |
