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01/09/08 01:25:12 PM
by Chaitali Mohile

The stock failed to climb high, instead drifting down to the retracement levels before giving up all major supports.

Security:   QCOM
Position:   N/A

Figure 1 you see the deep correction of 20 points for Qualcomm from June to July, 2006. I have drawn the Fibonacci retracement levels on the chart. It took several attempts for the stock to break out of its first level at 38%. The price rallied from 30 to 50 with zigzag moves, suggesting the weak bullish strength. The volatility continued, and you can see that crossing each Fibonacci level met with resistance. Finally, the negative pressure dragged QCOM down from 61.8% to below the 38% level. Coincidentally, the 200-day moving average also meets at this level.

FIGURE 1: QCOMM, WEEKLY. QualComm lacks strength to reach its previous high. Instead, the stock has slipped below its support.
Graphic provided by:
Thereafter, the security remained in high range-bound movement, which formed lower highs under the resistance of retracement levels and higher lows around the 200-day MA. The trendline showed the triangular formation, which again concludes the range-bound moves till the breakout occurs. But the stock was weak by itself, unable to hold the bullish supports on indicators; the volatile market pulled QCOM even below its lower trendline support.

The RSI (14) is now under strong resistance of 50 levels and is also forming lower highs. And the MACD (12,26,9) has two strong resistances, the trigger line as well as the zero line. The stock therefore has less possibility to initiate a fresh upside rally. Now, there are three immediate supports that should be watched carefully by traders. The chart is full of negative bias along with the market turbulence, so wait and watch is only remedy for this stock. If the market turns positive and the stock begins to climb, turning the resistance to support, then some buying can be expected. Otherwise the stock is laggard and traders should remain on the sidelines.

Chaitali Mohile

Active trader in the Indian stock markets since 2003 and a full-time writer. Trading is largely based upon technical analysis.

Company: Independent
Address: C1/3 Parth Indraprasth Towers. Vastrapur
Ahmedabad, Guj 380015
E-mail address:

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Date: 01/09/08Rank: 4Comment: 

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