WWM - Analytics

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Today’s Trading Edge: Qualcomm Inc. shares struggle to find support following difficulty in China

Qualcomm Inc. (QCOM) shares continue to selloff following Wednesday’s conference call that explained the company was having difficulty finalizing two major Chinese agreements.  The company posted better than expected third quarter results with earnings per share printed at $0.91 vs. forecasts of $0.86 and revenue came in higher at $5.46 billion vs. the $5.21B estimate.  Qualcomm Inc. shares dropped 15.25% to $51.07, the largest single-day plummet since April 2000. 

Price action on the Qualcomm Inc. daily chart displays the initial drop tentatively found support from the 50-day SMA, which currently trades at $56.55 level.  Bearish momentum remained strong throughout yesterday’s session and price ultimately made a major low at $49.92 and tentatively formed a bullish ABCD pattern.  Point D is targeted with the 127.2% Fibonacci expansion level of the B to C leg.  If downward pressure prevails, major support will come from the $46.60 level, which is both the 161.8% Fibonacci expansion level and very close to the 2011 low,

If we start to see price continue to stabilize here, further upside could target a return to the 50-day SMA.  If the delay ends with finalizing the agreement with the Chinese companies, we could see a relief rally support a stronger rebound. 

The Trade: Buy QCOM at $50.50, with a stop loss at $47.50 and a take profit at $56.50.  The Risk/Reward Ratio is 1:2 

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