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Andy Swan created and co-founded DaytradeTeam Service five years ago on a principle of empowering individual stock and options traders with the techniques and analysis methods typically reserved for elite professionals. His expertise in technical analysis and commitment to educating members earned DaytradeTeam a top-ranking among advisory services for several years.
Qualcomm is in trouble here, and is setting up perfectly for a short sell or bearish options position after confirming a triple top formation over the past six weeks. Let's take a look at the six month chart of QCOM.
Notice how QCOM (QCOM | Quote | Chart | News | PowerRating) has failed three separate times to break the 46.00 resistance level. The first time, QCOM fell from 46 to 41.50 on a two week pullback. The second time, QCOM bounced off of the 46 resistance level and dropped all the way to 39.02 on very heavy volume and a large gap lower. Once again, QCOM has failed to break the 46.00 level, completing the triple-top formation and is currently sitting right at 45 in what looks like the beginning of yet another pullback.
Here's how I would play the stock from here:
I'm basically looking at two possibilities for an alert on QCOM for DaytradeTeam
members late this week:
A basic short sell position that profits from QCOM's drip in price over the next
few weeks. Our target on this trade would likely be 39, with a protective stop
order at 46.46 to limit our loss should the 46.00 resistance fail. If the move
down towards 45 is swift enough, we will likely look to sell December 40.00 put
options against our position to generate some income from the trade.
A bearish options position. Over the next two days we will be watching the DEC
and JAN options premiums on QCOM extremely closely to determine what type of
spread would have the best profit potential with the lowest exposure to risk.
Possibilities include a bearish vertical credit spread, a 40.00 butterfly spread
or even a simple directional position on long-term, out-of-the-money put
options.
I fully expect QCOM to continue to gravitate toward the 45.00 "max pain" strike
level for options expiration on Friday of this week, so I will be watching for
any moves over 45.30 on Thursday and Friday to enter my position. If we don't
get a move up to 40.30+, I will most likely alert our members to the trade on
Friday afternoon at 45.00 or higher.
Andy Swan
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