Potentially with the broader market having topped in 2015 based on our big picture view, the current rally from Feb 2016 low might be bounce rather than new bullish cycle suggesting the upside is limited.
With that backdrop - QCOM appears to have topped in July 2014 and yet it's outperformance against the Nasdaq Composited topped in April 2009. This downtrend since July 2014 remains intact and having drop below the potential support around $56 is now vulnerable for further downside towards $35 - $30 region.
Here is the technical summary (also shown on the chart): 1. Has retraced 78.6% of the price drop from Jan 2000 high to Aug 2002 low Relative Strength with Nasdaq Composite topped in April 2009 and despite the price continuing higher till July 2014 which has set up a price divergence. 2. Has dropped below $56 which was previously a strong resistance and should have acted as support but it seems to have failed. It might now act as resistance again. 3. On monthly chart the RSI has fallen below 30 for the first time in a while appears to be confirming the bearish cycle with 20 & 50 MAs forming a cross. 4. The bounce since Feb low is running into resistance zone with RSI on Weekly chart could experience resistance at 50. 5. On daily the price appears to be forming a potential topping pattern in over bought areas. 6. It has an earnings announcement on 20th April, which could disappoint leading to weaker prices as it is struggling against the competition (see the article above) in addition to a weakness in the wider market
Conclusion: If the above observations play out then we could anticipate a retest of Feb 2016 low as initial target and probably make it 35 area in due course which has been structural support zone between 2005 - 2010.
Action: Consider Jan 2017, $30 PUT for around $0.50 or better may be $0.4 (presently around 0.54 - 0.59). Either a limit order or leading in to the earnings announcement and price reaction the order could be worked for close to $0.4 .
If filled we need the price to drop to around 45 to double the initial outlay.
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore as always, please do your own analysis for your trade and risk management. You should follow this on Paper Trading Account till you feel confident to apply the skill to a live account.
UPDATE 18/09/2016:
On weekly chart we could see - 50% retrace of the entire decline from July 2014 high and at previous support in Jan 2015 which could now
might become resistance
It might still have bit more upside to around $65 (200 SAM on weekly) so much check daily for reversal confirmation but potentially we could consider adding to existing position or taking a new position as detailed in the chart.
DanV
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UPDATE 24th July 2016: QCOM trade will need reviewing as the retracement if the initial megaphone pattern still in progress so no new trade. Any existing could be held as there will be very little available to exit. It should reverse soon and the original trade might still work out to exit possibly at breakeven
DanV
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Initially published on 15th March 2016
Suggested trade potential short
Jan 2017, $30 PUT for around $0.50 or better.
May be $0.40.
To add to existing or new position could be had for $0.25 -$0.28
A drop to $40, the Options could be priced $1.25+
Alternatively, a suggested PUT Spread Trade (as at 21/06/2016)
Buy Jan 2017 PUT with Strike $45 &
Sell Jan 2017 PUT with Strike $40
for Cost of = $0.68 - $0.73
A fill under $0.70 would do.
A price drop $40 would value options for $2.75+
DanV
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UPDATE - 7th May 2016: Qualcomm appear to have formed a double top into resistance area and it is very likely to follow trough with anticipated decline. The suggested options are now quoted for $0.39 - $0.43. So a fill anywhere around $0.40 or better is still valid and should be profitable. Here is the updated weekly chart
DanV
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UPDATE 4th April 201: Price has not moved significantly yet and still showing sign of weakness Vs NASDAQ which means the suggested PUT options at $0.40 is still possible. Earnings announcement is scheduled for 20th April 2016. So we might not get much move before then unless the rest of the market has reversed. Therefore, even if the earnings data prove to be good, it could spike and offer excellent short opportunity and our pending order for could be filled.
DanV
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For the comparison here is a chart of one of the competitor also looking close to topping out
On weekly chart we could see - 50% retrace of the entire decline from July 2014 high and at previous support in Jan 2015 which could now
might become resistance
It might still have bit more upside to around $65 (200 SAM on weekly) so much check daily for reversal confirmation but potentially we could consider adding to existing position or taking a new position as detailed in the chart.