Qualcomm Bulls Trying To Do Some Repair Work

Qualcomm, Inc. QCOM shareholders have been patiently waiting for the stock to take off like much of the technology sector has over the last six weeks. While the stock bounced off of the October lows, it gapped lower in ugly fashion on November 6 and has been struggling to rebuild itself technically since then.

Can the company's fundamentals lift the shares to a position of technical strength once again? Let's take a look at the Qualcomm picture.

What The Bulls See

• A reasonable price-to-sales ratio of only 4.54.
• 30.08 percent net profit margins that spin off over $6.58 billion in annual levered free cash flows.
• An immaculate balance sheet: Cash of $17.56 billion and zero debt and a current ratio of 3.73.
• A healthy dividend of 2.2 percent with a low payout ratio of 33 percent, leaving plenty of room for dividend growth if Qualcomm management so elects.

What The Bears See

• Some rich valuation metrics: A market capitalization of $121.20 billion that eclipses the enterprise value of $103.64 billion and a price-to-book ratio of just over 3.
• A technical picture that remains less than bullish for the time being.

The Technical Take

Technicians note that in order for Qualcomm to improve its technical picture, it will have to eclipse the $74.86 price level. Anything short of that would mean its most recent rally attempt is merely a corrective bounce. A break and close above that level, however, will make the future much better for Qualcomm bulls.

Above $74.86, the next resistance levels come in at $76.54 and $77.57. In terms of support, the first identifiable level comes in at $69.60 (the most recent pivot). The bulls need that level to hold up as support during any sell-off in order for their thesis to come to fruition.

Overall…

Qualcomm has some technical repair work to do before the technical crowed will become more bullish on the stock. Prospective buyers will become more emboldened if the stock can manage a close above $74.86. Until that point, it's the shorts that are likely taking the most action at current levels and above.