Qualcomm (QCOM) released their Q1 earnings figures last night and they beat on revenue numbers but they gave an in-line Q2 outlook. Prices reacted higher initially but they have been selling off this Thursday morning. Let's look at a few charts of this Real Money Stock of the Day.
In this daily bar chart of QCOM, below, we can see that prices have worked higher the past year but that does not mean the uptrend is healthy. Prices have tested the 50-day moving average line several times over the years but now the slope of the line is negative.
With several hours of trading to go we can see that prices are below the 50-day line. The slope of the slower-to-react 200-day moving average line is still positive and below the price action. Trading volume has been light and flat for much of the advance and that does not inspire confidence in chart watchers.
The daily On-Balance-Volume (OBV) has been flat since July and has diverged bearishly from the price action.
The 12-day price momentum study in the lower panel shows lower highs from November while prices made higher highs. This is a bearish divergence and can foreshadow a move lower. Overall a precarious state of technical affairs.
In this weekly bar chart of QCOM, below, we can see some weakness and bigger bearish divergences. Prices are still in an uptrend above the rising 40-week moving average line but this is a lagging indicator. Prices have found a little chart support around $85 but a close below that level is likely to precipitate further weakness.
The weekly OBV line has been stalled for the last three months and not confirming the price action.
The 12-week price momentum study shows lower highs since April so we know the pace of the rally has been slowing for months and that is not a bullish set up at all.
In this Point and Figure chart of QCOM, below, we used daily data. The chart still shows a potential upside price target of $101 but a trade at $84.75 should weaken the picture as it will be a new low for the move down. The bar chart may weaken with a break of the $85 level.
Bottom line strategy: The marketplace has been rewarding earnings beats and stronger guidance with soaring prices. Others not so fortunate with their numbers are seeing liquidation or selling. QCOM could be under selling pressure for the near-term so look for trading opportunities on the long side elsewhere. A breakdown to the $75 area would not be a shock to me.
