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STATISTICS


Qualcomm Enters Bear Market

10/25/11 09:31:10 AM
by Alan R. Northam

This statistical analysis shows Qualcomm now entering into a long-term bear market trend.

Security:   QCOM
Position:   N/A

The lower panel of Figure 1 shows the long-term statistical analysis of Qualcomm (QCOM). This image shows the 200-day linear regression trendline (solid blue line), the upper one sigma channel line (dotted red line), the upper two sigma channel line (solid red line), the lower one sigma channel line (dotted green line), and the lower two sigma channel line (solid green line). Besides their statistical significance, the red channel lines act as resistance and the green channel lines support.

FIGURE 1: QCOM, DAILY. This chart shows the daily price chart of Qualcomm in the lower panel along with its downsloping 200-day linear regression trendline and its associated upper and lower channel lines. The top panel shows the linear regression slope indicator followed by the R-squared indicator. This chart shows that QCOM has recently entered into a long-term bear market trend.
Graphic provided by: MetaStock.
 
The lower panel of Figure 1 shows price between the upper and lower two sigma channel lines over the last 200 daily trading sessions. Note that the upper two sigma channel line acts as resistance and the lower two sigma channel line support. Note also that in mid-October, price has run into resistance at the upper one sigma channel line and has not been able to penetrate this line of resistance, and that over the last couple of trading bars, price has bounced off the linear regression line and is moving back up to test resistance at the upper one sigma channel line.

A successful test of this line of resistance would signal that price is ready to move lower. A successful penetration of the upper one sigma channel line will allow price to move up toward the upper two sigma channel line, where it should once again run into resistance.

The linear regression slope indicator in the top panel of Figure 1 shows that QCOM entered into a new long-term bear market in late September, when it crossed below its zero line. As long as this indicator continues to move downward, the long-term bear market trend will continue.

The R-squared indicator in the middle panel of Figure 1 moved above its critical level in early October, indicating a 95% confidence level that the long-term bear market trend will continue. As long as this indicator continues to move higher, it indicates that the long-term bear market trend is gaining strength. Normally, this indicator moves up to a level of greater than 0.7 before the long-term trend becomes overstretched and begins a bottoming process. Thus, with this indicator now reading just 0.16, it indicates that the long-term bear market trend has a long way to go before bottoming.

This long-term statistical analysis shows that QCOM has recently entered into a long-term bear market trend that should continue for quite some time. This analysis also shows that price is currently moving upward to retest overhead resistance offered by the upper one sigma channel line. A successful retest will send QCOM lower. A successful penetration of this line of resistance would then send QCOM higher to retest resistance offered by the upper two sigma channel line. A successful retest of this higher line of resistance would then send QCOM lower.

Knowing that QCOM is now in an established long-term downtrend and that price is set to retest overhead resistance, traders can use their favorite trading tools to determine when to enter a bear trade in this security.



Alan R. Northam

Alan Northam lives in the Dallas, Texas area and as an electronic engineer gave him an analytical mind from which he has developed a thorough knowledge of stock market technical analysis. His abilities to analyze the future direction of the stock market has allowed him to successfully trade of his own portfolio over the last 30 years. Mr. Northam is now retired and trading the stock market full time. You can reach him at inquiry@tradersclassroom.com or by visiting his website at http://www.tradersclassroom.com. You can also follow him on Twitter @TradersClassrm.

Garland, Tx
Website: www.tradersclassroom.com
E-mail address: inquiry@tradersclassroom.com

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