For QUALCOMM, Inc. (NASDAQ:QCOM) The Tell Came on Friday

January 24, 2017, 07:48 am ET, BY Thomas H. Kee Jr- Editor, Stock Traders Daily| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

When stocks break longer term support levels investors should respect it, and QUALCOMM, Inc. (NASDAQ:QCOM) is a case in point.  The Tell in Qualcomm came on Friday, in the latter part of the day, when the stock broke our longer term support levels.  Prior to that, longer term support was holding, but on Friday the stock broke longer term support, and that break was a Tell, a precursor, suggesting that additional declines lie ahead.

On Monday, that is exactly what happened, and Qualcomm shares tanked.

What's worse, even at these lower prices the stock still looks expensive based on valuation in relation to earnings growth projections (see fundamental charts below).  Coupled with this fundamental observation, the breaks of longer term support puts shares of Qualcomm in a precarious position from an investor's standpoint.

Not only have the breaks of longer term support raised red flags, concerning news currently exists, and projected growth rates make the admittedly subdued looking multiple look rich.  The stock trades at only 12x vs. the market which is much closer to 25x, so it looks cheap relative to the market, but expensive vs. an earnings growth rate expected to come in at 5%. 

Although the stock will likely trade haphazardly in both directions, which is normal after abrupt declines, especially news driven declines like what we have seen, the break of longer term support is very clear.  For now at least investors should avoid shares of Qualcomm.  Eventually new longer term support levels will come, but for now the existing ones are broken and the stock is set to flounder for a while.

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Technical Summary

Support and Resistance Plot Chart for QCOM

Long Term Trading Plans for QCOM

January 24, 2017, 8:51 am ET

The technical Summary and associated Trading Plans for QCOM listed below will help you make important timing decisions for your trades. This data is based on our proprietary analysis for QCOM. In addition we offer Market Timing Models and Stock Filters in the links above which may increase the proficiency of the decisions you make.

QCOM - (Long) Support Plan

There is no current Support Plan to trigger a buy of this stock at this time. This usually means that there are no clear support levels at this time, so buying the stock as it falls could be considered catching a falling knife. Buy signals only exist if resistance breask higher.
This often is a signal that the stock you are watching is weak. Waiting for a turn higher may be more intelligent than trying to catch a falling knife. In any case, new support levels are usually revised to the database at the beginning of the next trading session.

QCOM - (Short) Resistance Plan

Short under 63.72, target n/a, stop loss @ 63.98.
The technical summary data is suggesting a short of QCOM as it gets near 63.72, but the downside target is not available from the current data. This tells us to hold that position if it is triggered until a new downside target has been established (updates occur at the beginning of every trading session) or until the position has been stopped. The summary data tells us to have a stop loss in place at 63.98. 63.72 is the first level of resistance above 54.88, and by rule, any test of resistance is a short signal. In this case, if resistance 63.72 is being tested, so a short signal would exist.

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