Friday, February 23, 2007

Trade of the Day - QUALCOMM, Inc. (Public, NASDAQ:QCOM)

Last night I posted a bullish flag setup for QCOM. At the end of the post, I stated that a gap up would invalidate the setup and should be traded like a gapper dummy trade. This morning QCOM did gap up on some favorable news regarding pending patent disputes. However, it gapped too high and tanked on the open. It came back to its base and chopped around for a good portion of early morning trade. Finally, as price moved sideways towards the rising 10 period EMA, I noticed that it was setting up a base of support at the $42.90 level. Notice that three candles had lows of exactly $42.90 (red line which marks my initial stop). I took a long entry on a break of the 7th bar high with support from the rising 10 period EMA just below. I had two targets $43.40 which matched last Friday's high and today's OR high; and $43.60 which was a significant pivot point in pre-market trade (refer to chart below).

QCOM did a three bar vertical, hitting both targets for a partial and a complete. It then carved out a combined bearish tweezer top and bearish engulfing pattern ( bars 10 & 11). After a midday swoon it eventually came back up and tagged $43.60 level again. So $43.60 has become our new resistance level going foward.

As a follow up trade next week, I'd like to see a base and break play at $43.60.

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