Traders position for rebound in chipmaker
11/01/17

Apple giveth, and Apple taketh away.

Qualcomm (QCOM) dropped more than 6% yesterday amid rumors that Apple (AAPL) was considering using other companies to supply components for its flagship phones and tablets.1

QCOM, which on Oct. 30 had capped a 12% rally off its early September low, gave nearly the entire move back on Halloween, dropping near the resistance zone (around $50) represented by the stock’s early 2016 swing lows and its September 2017 spike low. The stock rallied to close at $51.01 after dropping to 50.02.

Qualcomm (QCOM) 12/31/15–10/31/17

Source: OptionsHouse

The move in QCOM occurred the day before its scheduled earnings release this afternoon. Punctuating the move was some monster options activity, wherein more than 180,000 November 52.50 calls traded at $1.00 early in the trading session.

The volume in these options suggests some traders are betting on at least a temporary respite in the stock, and the performance after similar moves in the past provides a potentially interesting sidebar: Since 1993, QCOM has closed at least 6% lower (while also posting a low at least 4% below the previous low) 71 times, and has closed above the down day’s close nearly 63% of the time over the next two days. Certainly food for thought.

Of course, that means the stock closed lower 37% of the time in the next two days, which in the current case will undoubtedly depend on how Qualcomm’s earnings call unfolds. 

 

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1. Marketwatch: Qualcomm shares slide 6% on report Apple may drop use of its chips. 10/31/17.