Qualcomm: A Technical Setup Is Emerging, and It's Bullish

Key Points

• Qualcomm shares are maintaining their uptrend despite some cooling from multi-month highs.
• The Alphawave acquisition has provided a much-needed bullish catalyst for investors, while technical indicators show plenty of room to run.
• With earnings approaching and the broader market in risk-on mode, there's a lot to like about Qualcomm's setup. 

Qualcomm Inc NASDAQ: QCOM closed just under $155 as the bell rang to end Tuesday's session, continuing to cool somewhat from last week's multi-month high. The pullback comes after shares gained more than 30% from April's low, marking one of Qualcomm's better rallies of the past year. But to keep some perspective on things, after a move like that, taking a breather makes perfect sense.

Much of the recent surge stemmed from news of the Alphawave acquisition, which delivered exactly the kind of bullish catalyst Qualcomm needed to break out of its sideways action. As we noted last week, this deal positions the company squarely in the high-growth data center market, giving investors a fresh narrative to rally behind.

As we've mentioned recently, Qualcomm has been a decidedly frustrating stock to own and has consistently lagged behind its bigger and better-known peers. But there's something to be said for backing the underdog, especially when its price-to-earnings ratio is, at just 16, a fraction of some of its competitors. Let's jump into the technical setup and see what there is to like.

The Uptrend Is Intact

As we head into the dog days of summer, here's what matters most for traders: despite the cooling in recent sessions, Qualcomm's uptrend remains firmly in place. The stock continues to print higher highs and higher lows, the classic hallmark of a healthy advance, and whenever the bears have shown up, they've been unable to reverse the momentum that's building.

The $152 level has emerged as the key support to watch to the downside, as long as shares hold above it, the bulls maintain control. Should we see a drop below, things could get dicey, especially given Qualcomm's unfortunate reputation for disappointing investors. However, with the stock trading up in Wednesday's pre-market session, it looks like buyers are starting to step in once again. Since April, every pullback has been bought up, and this one is shaping up to be no different. 

Technical Indicators Are Flashing Green

The technical indicators all back up the bullish price action and setup there too. Qualcomm's relative strength index (RSI) sits at a healthy 55, firmly in bullish territory but nowhere near overbought. This leaves tons of room for the stock to run without hitting extreme levels that typically precipitate sustained profit-taking selloffs.

The stock's MACD is also in a bullish pattern, confirming that the forward momentum stays intact. When price action and technical indicators align like this, it usually signals more gains ahead.

Further Bullish Catalysts

In terms of catalysts to be thinking about, Qualcomm's next earnings report will be at the end of July, giving the stock and investors a clear date to target on the horizon.

With the broader market flirting with all-time highs once again, investors have clearly shifted back into risk-on mode.

This is the kind of environment where growth stocks like Qualcomm tend to outperform, and given Qualcomm's history of beating expectations, it's fair to expect Wall Street to be buying into the stock ahead of the release. 

With the technical setup already bullish, a pre-earnings tailwind in the form of a run-up could be just what the stock needs to pop above last week's high of $162.   

Where It Goes From Here

Ultimately, the Alphawave acquisition gives Qualcomm a compelling growth story investors can get behind, while the technical setup suggests there is plenty of fuel left in the tank. With the company's next earnings report approaching in what is becoming a very risk-on market environment, it feels like the stars could be aligning for Qualcomm. 

For those of us on the sidelines, the path forward looks quite clear. Traders should watch the $152 support level closely, but as long as it holds in the coming sessions, assume the uptrend will continue into July. In fact, we might go as far as to say that any weakness in the meantime could be considered a buying opportunity.