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Sunday, October 9, 2011


QCOM may possible be one of the easiest trades in the next three months, despite its relative weakness on Friday.

Now that we know QCOM will be in every single iPhone 4S produced, including all new carriers and the fact that the initial response has been pretty good, QCOM will break out from its negative weekly chart.

The SMA's reflect the resistance near mid 52.

QCOM reports Nov 2nd. They are projected to earn $0.78 for the quarter, and with a strong iPhone 4S future guidance is more than likely to remain intact, regardless of the 'end-of-world' or 'China Syndrome' crowd. (If the media starts to use 'China Syndrome' to describe the slow down in China, you know it came from me :)

Even though QCOM has a PE of 20, that is historically low for the company, especially given its growth over the next few quarters to a year out. But this is not a multiple expansion story. When factoring in the Nov 2nd quarter, QCOM will have a trailing PE of 19 with its stock price at 66.

That potentially allows QCOM to run 16 points from current levels. But the easy part comes from playing QCOM from current levels to 57, its first test of major resistance.

There is always a probability that this takes longer to execute, but QCOM has accelerated earnings going into the end of the year. So there is a very strong likely hood that QCOM will see at least 57 by the end of the year.

I currently can not trade because I am getting my fund in order, but QCOM was one of the missed opportunities I wrote about.

Here is exactly how I would trade QCOM. At 46-47 level, I would have a total of 12 Jan 47.5 call options. At 50, the position would be reduced to 6. On Friday's weakness 2 options would have been added, leaving me with a total of 8. If QCOM continues to decline, more options would be purchased. At 53-54, I would maintain 6 call options, repositioned to the Jan 50 calls, and letting them run to 57.

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