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Qualcomm Stock Delivered, Has Another Rally Brewing

Nicolas Chahine

In early June I shared a note about going long Qualcomm (NASDAQ:QCOM) stock. The trade delivered a big win as the stock rallied over 20% in about a month. Usually when I get profits this fast, I book it.

Four Big Reasons Why Qualcomm Stock Can Stay in Rally Mode

However, this time the bulls still have the chance to almost double the win. The bullish QCOM stock trade is still viable today.

Those long-term Qualcomm can stay in it since the short-term price gyrations don’t matter much over the years. Those who are looking for short-term entries have an opportunity at these levels.

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Pivotal stock price areas like the one that Qualcomm stock has are sticky. Bulls and bears have fought over them in the past and they will do it again now. Neither side will want to lose the line.

If the bulls prevail, meaning they prove that they can hold this level as support, then they can use it to set higher highs. And therein lies the opportunity.

QCOM Stock Has a $25 Rally Brewing

In this scenario, the breakout levels are clear. If Qualcomm stock can rise above $81, they will invite momentum buyers to target $100 per share. There will be resistance is around $90.50 as it marked a major failure point back in early May of this year.

The fundamentals do matter but the technicals for QCOM are more important. The outcome of this battle is not a gimme, the fans need to take it. Onus is on them to deliver.

The buyers will need the help of the general equity market. We are at all-time high and investors are usually nervous at these altitudes. This is especially true when we have so many geopolitical concerns littering the ticker tape.

Qualcomm stock also has the added wrinkle of the economic war between the U.S. and China. It is part of the sector that has been a political football as they negotiate a trade deal between the two nations.

This is likely to linger for years even though the media would have you believe that a resolution is imminent. It is not but this shouldn’t affect the fundamentals of Qualcomm much. Eventually businesses will find a way to work around the politicians.

The trend of moving into a completely digital age has accelerated exponentially and we will need the suppliers to deliver all they can, especially when it comes to 5G and communications.

Where there is a will there is a way.

QCOM stock is not cheap as it sells at a 40 price-to-earnings ratio and four times sales. For perspective, this is more expensive than Intel (NASDAQ:INTC) that has a 12 P/E and sells at three times sales.

The battles for 5G dominance is raging, so politicians will have to come to terms sooner rather than later if they want smooth evolution to continue. Communication tech is important to the whole world. Two leaders alone are not going to stop it. There will be enough pressure soon enough from both sides to make a deal happen.

QCOM Bottom Line

Meanwhile Qualcomm stock will continue its ascent in spite of the headlines. The stock has been setting higher lows and has the opportunity to break out from a neckline. If and when that happens, the bulls will overshoot higher.

The wrinkle is that earnings are coming soon. The reaction to those is completely binary and arbitrary. Even if the company gives us the results ahead of time we cannot guess how traders will react to it.

But as long as management continues to execute well on its plans, eventually the short term knee jerk effect fades and yields to the ongoing trend.

Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room free here.

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