E Stalking Qualcomm For An Entry Point After Pullback

My investment philosophy is somewhat simple. Fundamental analysis tells us what we should buy and what we should sell, while technical analysis and sentiment analysis tells us when to buy and sell. With the stock market as a whole making such big upside moves over the past three months, and over the past year for that matter, it has been a little more difficult to find good quality stocks that aren’t in overbought territory.

Even low quality stocks, from a fundamental perspective, have seen some impressive gains in many cases. In fact, there were certain periods over the past year where low quality stocks seemed to be outpacing high quality stocks. Investors were basing their investment decisions on the status of stimulus plans that they believed would help certain industries rather than basing their decisions on the quality of the stock before and after the pandemic.

One company that I’ve been watching for a number of years, but have been stalking it recently is Qualcomm (QCOM). The company is known for its semiconductors that go into mobile devices and it has seen strong earnings and revenue growth in recent quarters, but we will get to that in a moment.

The weekly chart for Qualcomm shows why I have been stalking the stock. From a low of $57 last March to a recent high just below $168, the rally has been impressive over the last 11 months. There have been very few dips of any consequence and the overbought/oversold indicators have been in overbought territory for most of the last seven to eight months.

QCOM Weekly TalkMarkets.png

Over the last month, the stock has pulled back approximately 14.7% from the peak in January. The pullback has caused the weekly stochastic indicators to drop below the 50-level for the first time since last spring. It looks like the indicators will continue lower in the coming weeks and could reach oversold territory.

The 10-week RSI is just above the 50-level and that is a level the indicator hasn’t crossed below very often. In fact, it has only been below the 50-level twice in the last two years, in early 2o19 and last March.

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William K. 2 weeks ago Member's comment

An interesting point of view here. Looking at the Qualcom business it seems that a product development win has increased profits quite well, and if their patent protection is adequate the increase will last. So the time to buy was a while back, and now the time willbe to hold and await the dividends.