The popular American multinational semiconductor and telecommunications equipment company, QUALCOMM, Inc. (NASDAQ: QCOM) seem to be gearing up for a surge as per its latest charts.
#1 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This usually indicates a possible bullish bias for the stock.
#2 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has recently formed a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as purple lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern which is a possible bullish sign.
This is a possible bullish setup.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart.
This indicates possible bullishness.
#5 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines.
The +DI line is also currently above –DI line. This is a possible bullish setup.
#6 Breakout from Consolidation Area: The weekly chart shows that the stock was trading within a range since the past several months. This indicates consolidation. The consolidation area is marked as a pink color rectangle in the weekly chart. Currently, the stock has broken out of this consolidation area. A breakout from a consolidation area generally indicates bullishness.
#7 MACD above Signal Line: The MACD line (blue color) is currently above the MACD signal line (orange color) in the weekly chart as well. This is also a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: You can purchase half the intended quantity of shares of QCOM if it opens above yesterday’s close of $89.98. The rest of the shares can be purchased if the stock closes above yesterday’s close today.
Alternatively, you can purchase the shares of QCOM if it corrects to a price of around $85.
TP: Our target prices are $100 and $110 in the next 3-6 months.
SL: To limit risk, place a stop loss at $81.20. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 22% to 29% in the next 3-6 months.
- Entry at $85: For a risk of $3.80, the target rewards are $15.00 and $25.00. This is a nearly 1:4 and 1:7 risk-reward trade.
- Entry at $89.98: For a risk of $8.78, the second target reward is $20.02. This is a nearly 1:2 risk-reward trade.
In other words, this trade offers nearly 2x to 7x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
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