Oversold Stock of the Day: Qualcomm (QCOM)
The strong stock market rally of the past week has led to few oversold opportunities outside of ETFs betting against the market. However, following an earnings-related drop, shares of Qualcomm (QCOM) are near oversold levels and look set to trend higher in the coming weeks.
The stock’s latest RSI, or relative strength index reading of 41 is hardly oversold. But looking at shares over the past few months, it’s still at the lowest level. Shares seem to have found some stability near the $145 range, and will likely continue to trend higher.
Shares rallied before earnings on news of a new CEO, but dropped following earnings. While the company beat on earnings expectations, supply restraints indicated potentially weak sales. With the 5G rollout underway, that could cause a huge impact to the company’s bottom line.
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Action to take: The June 2021 $155 call would profit from shares moving about $10 higher in the next five months. Last trading for about $10.60, the option offers mid-to-high double-digit gains. The profits will likely depend on the speed and strength of a rebound in shares.
Traders should look to clear out profits if shares see their RSI get into overbought territory, or about a month before closing, before the time premium starts to work heavily against the option.