Monday, August 9, 2010

QCOM Watch

The telcom technology company Qualcomm Inc.(QCOM) has moved to bull phase on three major indicators amid chartist chatter that the price is showing a bullish flag with a target of around $42.
QCOM $39.75

If that target is hit, it will put QCOM up to where it was trading in April, right before an earnings surprise knocked the price down to a lower level.

A QCOM chart looks like physics class explanation of quantum leaps. It's not a slow and steady sort of stock. Gentle slopes are alien to its landscape. QCOM's moves tend to come on earnings announcements, and in the form of very large gaps.

That happened most recently with the July 21 earnings announcement, which gapped the price up by 6% overnight to the current $38.20-$39.50 range, where it has stayed ever since.

In between earnings, the price tends to move sideways, or to take a decisive move in one direction or another, as happened to the downside from June 22 to July 1, and to the upside from July 2 to July 14.

So while a zig-zagging rise -- which a flag is by definition -- to $42 isn't out of the question, such a pattern would be quite alien to QCOM's recent behavior.

Today's signals moving to bull phase are Person's Proprietary Signal (pps), the parabolic sar and the macd, all which tend to be fair, although imperfect, predictors of QCOM's non-gapping directional moves. During the sideways phases, the pps in particular tends toward whipsaws.

In addition to the signals, the bull argument looks at today's price, which opened 2.4% above Friday's close and so far today has traced a 2.7% rise intraday.

Also, the stock is trading above the 200-day and 20-day moving averages, and the fast stochastic has bumped from neutrality to above the 80-line, a sign of a strong move.

The high today (so far) of $39.86 is above the upper level of the present range.

So, flags aside, the chart makes a good bullside argument.

On the bearside, today's rise has not produced a volume spike. With 90 minutes of trading left today, volume is about 27% below Friday's. There's still plenty of time for today's volume to make that up, but if a significant volume spike were in the works, we would see it now on the chart.

On the Person's chart, the price rise put QCOM at the weekly secondary upper Person's pivot (meaning it has already broken through the primary pivot at $39.12).

Person's Table
ppspps openupper pivotlower pivot
QCOM $39.75 $38.87 aug9 $39.58 -0.4% $38.07 -4.2%

And the QCOM price support and resistance analysis. Note that the middle of a gap is often a resistance area.

Reversal Levels
  • $42.00, +5.7% (flag target)
  • $41.05, +3.3% (middle of last gap)%
  • $39.86, +0.3% (today's high)
  • $ <== You are here.

  • $37.76, -5.0% (recent swing low)

Bottom line: For my own account I would like QCOM as a bull play based on the chart alone. The flag is nice, but I call such things "Tinkerbell indicators". If enough people believe that the pattern is true, then they work. If more than enough people are following the pattern, then it breaks down because of early exits. Yet another argument for the market being one great study in mob psychology.
The Great Reflation: How Investors Can Profit From the New World of Money OK. The credit bubble burst. Housing, burst. Shockwaves reverberated. Markets collapsed. What lies ahead as we reemerge from the wreckage.

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.
  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.

No comments:

Post a Comment