Qualcomm Breaks Out After Earnings

Published on Thursday, 02 February 2012 16:11 Written by David Becker

New York, February 2^nd (TradersHuddle.com) – Qualcomm Inc. (NASDAQ: QCOM) surged to a 12 year high in heavy volume as better than expected earnings and guidance lifted the stock.  Earnings per share will climb to $3.36 to $3.56. Qualcomm had previously predicted revenue of $18 billion to $19 billion and profit of $2.80 to $3 a share.  Analysts had estimated earnings of $2.97 on sales of $18.47 billion.  Sales for the second quarter ending in March will increase to $4.6 billion to $5 billion. Analysts projected $4.51 billion.

The price of Qualcomm gapped on the open moving up from 59.56, to 61.30.  During the first hour of trade, the stock continued to trade higher, until profit taking slowed upward momentum.  The RSI relative strength index briskly moved above the 70 level, which is generally considered an overbought region. 

The stock sliced through resistance made between 58.70, which was horizontal trend line resistance as the 5-day moving average acted as short-term support.  Target support is the 50-day moving average near 54.43.  Upside is likely capped by channel resistance near 63.00.

The MACD is now expanding after moving toward contracting as volume and volatility dried up before the earnings announcement.  The index line is near .2, still above the zero line, and the moving averages are upward pointing. 

On a weekly chart, the stock looks to have broken out to the upside and is now above weekly resistance made near the highs at near 58.70 in July 2011, prior to the re-focus on the European debt crisis.  The stock price should continue to rally but investors should eye the stochastics (and the RSI) for extreme overbought levels.