QUALCOMM, Inc.: This Chart Shows Where Qualcomm Stock Is Going Next
What if I told you that QUALCOMM, Inc. (NASDAQ:QCOM) stock has been in a bull market since 1999? It’s true. Its trend is dominated by a low sloping trend line that consistently acts like a springboard, bouncing the stock higher.
Do I have your attention?
The following chart is exactly what I am referring to:
Chart courtesy of www.StockCharts.com
The long-term uptrend is what I am referring to when I speak of a bull market that has been in force since 1999. It may not be exactly what you were picturing, but as long as the shares remain above this trend line, the bull market is intact and the implications are bullish.
Prior to 2011, $45.00 marked the resistance level that rejected QCOM stock shares from trading above that line, as sellers were more than willing to step in. The range that dominated shares below resistance was $33.00 from peak to trough. It is not a coincidence that when shares finally broke above the resistance level, the stock finally attained a high of approximately $78.00, which is coincidentally $33.00 above $45.00. This is one tool chartists use to obtain a price objective.
The key takeaway is that when resistance is finally broken, it acts as support. Qualcomm stock has continually found support when testing $45.00 after 2011.
The long-term trend is good at clarifying the big picture, but a trader doesn’t always have an infinite time horizon. The following chart shows how Qualcomm stock has just transitioned from a downtrend to an uptrend. This is going from bad to good.
Chart courtesy of www.StockCharts.com
The bad news began on September 22, 2014, when Qualcomm stock generated a death cross. It is a bearish signal that is produced when a faster moving average (50-day moving average) crosses below a slower moving average (200-day moving average). Traders use this signal to confirm a bear market is on the horizon. Shares proceeded to fall 40% to a low of $41.45 on February 11.
The good news began on May 26, when Qualcomm stock generated a golden cross. It is a bullish signal that confirms a bull market is on the horizon. This signal is the exact opposite of the death cross.
The good news continued to roll in as Qualcomm stock finally broke out of its downtrend line. The pattern of lower highs and lower lows has ceased and this feat was accomplished in dramatic fashion. A breakaway gap on the charts marks the upside trend break. Breakaway gaps signal that a new trend has begun. They also have a great quality of rarely getting filled, as the gap remains open.
Apart from the optimism created from the broken downtrend there are a few other key factors that are confirming a trend reversal. The recent rally has taken shares above a key Fibonacci retracement number.
Chart courtesy of www.StockCharts.com
The Fibonacci retracement numbers (highlighted in green) are a very popular tool used by many technical traders. This tool is used to identify counter-trend price objectives. In theory, when a stock breaks a primary trend, shares will retrace between 50% and 62% of that trend.
Shares of Qualcomm stock have just breached the 50%–62% retracement level; if I were bearish on Qualcomm stock, I would expect shares to stall in this area. Since I am not bearish, I expect a bullish outcome. My expectations are that share prices will eventually retrace the entire drop and the 2014 high will be tested.
The Bottom Line on Qualcomm Stock
This year marks a reversal in the minor bearish trend that has dominated over the last year and a half. The big picture always remained bullish. I expect QCOM stock to attempt a test of its prior high of $78.00. The only caveat is if share prices fall and close below the long-term trend. This event will signify an end to the long-term bull.
