QUALCOMM, Inc. (NASDAQ:QCOM) opened with a 3% gap up on the news of the hedge fund Jana Partners advising the company to spin off its wireless chip business to unlock value, but failed to sustain the higher levels and ended the session with a loss of 0.62%. Very predictably for a day like this, the volume exploded to 28 million, more than double the daily average of 12 million only. A gap up open followed by a close at the day low in a big range day – the last short term top on March 10th formed exactly like this. The similarity suggests that the latest short term top has just been formed and now another sharp correction can be expected.
QUALCOMM, Inc. (NASDAQ:QCOM) has been in a bear market for the last 12-15 months and doesn’t show any strong signs of finding a bottom yet. Samsung recently decided to drop QUALCOMM, Inc. (NASDAQ:QCOM) and go in-house for both its Galaxy S6 baseband components and applications processor. If the forecast sales of Galaxy at 55 million materialize, then it will amount to a nominal loss of $2.9 billion for QCOM.
The other threat for QUALCOMM, Inc. (NASDAQ:QCOM) comes from Intel Corporation (NASDAQ:INTC) announcing its own 64 bit application processors with integrated 3G and 4G modems. If Intel manages to ship the speculated 30 million SoCs in smartphones in 2015, then it would chip away a lot of the baseband technology market share of QCOM.
Technically, the downtrend remains firmly established as marked by lower highs and lower lows, notwithstanding the recent corrective rally. The current drop can reach $64 levels; even retest the recent short term bottom at $62. There is a trendline support around $63 levels but the entire price action in the last 2 years suggests a medium term top formation, not good news for the company.