Investment Opportunity Opens Up With Wireless Chip Leader, Qualcomm, Inc.

Qualcomm Stock the King of Wireless Microchip Stocks

The world is continuing to face a microchip shortage in many industries. This has led to a significant buildup of chip manufacturing capacity worldwide. The U.S., in particular, could undergo a semiconductor renaissance over the next decade as the country works on expanding its microchip supply chain and reducing its dependence on foundries in Taiwan.

Semiconductor stocks powered higher in January before melting down. The PHLX Semiconductor Sector index traded at 4,068 at its high mark, but it has corrected by 25% to date, representing a trend reversal in the semiconductor sector.

Chart courtesy of StockCharts.com

The rise of the semiconductor stock market was excessive, but it didn’t help with the current bearish sentiment in the technology and growth segments.

Given the markdown, I’ve been seeing more attractive entry points for semiconductor stocks, albeit there’s no technical evidence that a bottom has formed. In other words, there could be more downside moves on the horizon.

One victim of the semiconductor stock selling is Qualcomm, Inc. (NASDAQ:QCOM), the premier developer of chips for wireless applications.

Almost all smartphones have technologies developed by the company. That means Qualcomm receives royalty payments for every device sold that includes its technology.

QCOM Stock Doubles Since Major Breakout in 2019

Qualcomm stock traded as high as $193.58 in January, prior to declining by 25% to the current $146.00. QCOM stock actually surged by more than eight percent on April 28 after Qualcomm, Inc. reported market-beating first-quarter financial results.

At its current level, the entry point for QCOM looks more attractive than before. Qualcomm, Inc.’s 52-week low was $122.17 in October 2021.

The following 10-year Qualcomm stock chart shows a major channel breakout in the first quarter of 2019. That breakout led to another smaller accumulation channel that was followed by a significant upside break following the March 2020 market sell-off.

Chart courtesy of StockCharts.com

Shares of Qualcomm, Inc. again settled into a sideways channel before breaking out to their record price of $193.58 in January 2022. QCOM stock failed to hold the breakout attempt and has settled back into the sideways channel with key support at $120.00.

Investors would want to see Qualcomm stock hold this support. Otherwise, there could be a move back to the previous channel below $90.00. This represents the major downside risk.

The following one-year chart shows QCOM stock rallying back to a key Fibonacci 61.8% retracement level at $148.80. Traders should watch if this holds. Otherwise, they can expect shares of Qualcomm, Inc. to return to the range of $130.00 to $140.00, which would make a decent entry point.

Chart courtesy of StockCharts.com

If the Fibonacci 61.8% retracement level holds, the next target will be the 50% retracement level of $157.39, followed by the 38.2% retracement level at $165.99. Above this level is the high.

There’s no timeline for these potential moves by Qualcomm stock, but I suggest looking at dips toward $130.0 as entry points.

Analyst Take

Picking a bottom for a stock is extremely difficult, and that’s the case with Qualcomm, Inc.

QCOM stock might not hold at its current level, but I look at any price weakness as an opportunity. Even if Qualcomm stock drops, investors can accumulate shares and hold out for a reversal.