Qualcomm Inc. (QCOM) was lasted reviewed in late July, when we said: "The price of QCOM is weak today, but it does not look like the start of a serious breakdown. We would look for nearby support to hold until proved otherwise."
In the subsequent weeks since our last look we have seen prices trade in a relatively narrow range of up to $54 and down towards $51. Does this kind of price action mean that buyers or sellers are gaining the upper hand? Let's drill down in our charts and indicators to see what strategy makes sense now.
In this daily bar chart of QCOM, above, we can see that prices dipped towards $52 in early February. A more serious test of $52 occurs in late April, with prices testing the area again in August. The pattern shows some heavier volume days around each of those lows. The daily On-Balance-Volume (OBV) line also makes lows with the price action.
Heavier volume when prices hold around $52 implies that buyers of QCOM are meeting the sellers and prices hold. In August, the OBV line is behaving a little differently, in that the line is flat -- but the OBV line moved up sharply in the February and April/May. Prices are as low as they have been all year, but this time it does not look like buyers are being aggressive.
There is a small bullish divergence in early August and now, with a higher low on the momentum indicator (lower panel) and prices making lower lows. This divergence is probably not significant enough to anticipate a rally ahead, with the 50-day and 200-day moving average lines pointed down.
In this weekly chart of QCOM, above, we have a mixed picture, technically speaking. Prices are below the declining 40-week moving average line. The weekly OBV line has not been able to stage a sustained upside move all year.
In the lower panel is the 12-week momentum study, which shows a higher low from February to August as prices made lower lows. This is a bullish divergence and on this timeframe suggests a potent rally is possible.
In this Point and Figure chart of QCOM, above, we can see a price target of $50, which would be a new low for the move down. Prices don't have to trade down to the target, but it is possible. On the upside, a trade up to $53.62 will be a positive development.
Bottom line: QCOM needs to prove itself. There may not be a lot of downside risk right now for QCOM, but at the same time we find little in the way of compelling reasons to go long. I would look to allocate my investment capital somewhere else right now.
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