Although the recent deal of Qualcomm Inc. (NASDAQ: QCOM) with the Chinese smartphone maker Xiaomi may possibly bring strong gains for the company, a technical analysis on the QCOM stock suggests a dark picture for the short term.
During the past 12 months, Qualcomm Inc. has been experiencing a downward trend, as the company’s stock dipped by almost 30 percent since the month of January. Although the firm has been the leader of the rapidly growing smartphone semiconductor sector, Qualcomm’s stock has recently suffered from some blows. This happened despite the company having a strong edge over Intel, which mainly provides chips for the PC and server markets. The mentioned industries are known to be stagnating as of late.
Despite the patent licensing agreement which the company has signed with Xiaomi recently, investors have begun to worry and expect the worst.
One of the primary problems for Qualcomm Inc. is its range of patents. Although generally speaking, patents are significant assets for technology companies or any other type of company, these have somehow become a nuisance on the part of Qualcomm. This is especially true in the various regions in Asia.
Earlier this 2015, the company has paid off nearly a billion dollars to antitrust authorities in China in order to settle things down and for Qualcomm to resume its operations without any problems. Aside from this, the firm also battled against local merchants who withheld payments for royalties after struggling with the antitrust lawsuit.
While Qualcomm is taking time to recover the mentioned royalty payments, the fair trade commission (FTC) in South Korea is beginning to investigate on any anti-competitive policies that the company may be following with regards to patent licensing. As these new investigations are ongoing, the shares of Qualcomm Inc. have edged lower by nearly 10 percent of its value in that same day (November 18). Furthermore, regardless of the latest bullish indications which suggest that the QCOM stock may recover in China, the company could slide even further.
According to some analysts’ technical analysis, the stock is showing more weakness in the future. The analysis of the QCOM stock emphasizes the possibility of a downward movement, at least in the short term.
Just recently, the company’s stock headed below the $50 level and slumped to its 52-week low of $47.52. Though the shares of Qualcomm have recovered by over 9 percent since its low which was seen in November 18, the results of the technical analysis suggest that investors should expect more pressure on the stock.
In the month of July last year, the firm was able to reach a high of $78.57. After this, the QCOM stock has continued to change hands below its intermediate to long term moving averages. In addition, it also constantly made lower highs and lower lows. When the analysts used the Fibonacci expansion strategy, they learned that the maximum downside is at $40.08.
In order to have a bullish reversal, a breakout above $63.87 is necessary. However, this will only happen after the stock hits its bottom at close to $40. Market players should definitely watch out for an opportunity at the mentioned levels to take a good position in the company’s stock.