Qualcomm Incorporated (QCOM) reported quarterly results on Nov. 6 and extended its winning streak to 11 consecutive quarters of beating earnings per share (EPS) estimates. The stock set a multi-year intraday high of $94.11 on Nov. 9 in reaction to this earnings report. Qualcomm stock has been above its fourth quarter pivot at $79.20 since Oct. 25, which indicates potential strength to its monthly risky level for November at $96.42.

Qualcomm shares ended last week at $90.81, up 59.6% year to date and in bull market territory at 84.9% above the Dec. 31 low of $49.10. The stock has an elevated P/E ratio of 30.71, but it offers a dividend yield of 2.74%, according to Macrotrends.

Qualcomm provides semiconductors for integrated circuits, CDMA technologies, and voice and data communications. The company earns licensing fees from device makers that use its intellectual property portfolio of chip system products. Strength in semiconductors indicates that the economy remains strong, as almost all durable goods we buy have computer chips in them.

The daily chart for Qualcomm

Daily chart showing the share price performance of Qualcomm Incorporated (QCOM)
Refinitiv XENITH

The daily chart for Qualcomm shows that a "golden cross" was confirmed on May 2, when the 50-day simple moving average rose above the 200-day simple moving average, indicating that higher prices lie ahead. The stock dropped after this positive signal, but the "golden cross" remains in play on the chart.

The close of $56.91 on Dec. 31 was input to my proprietary analytics and resulted in its annual risky level at $74.55. The stock gapped above this level on April 17 and continued higher on a positive reaction to earnings reported on May. 1. The close of $76.07 on June 28 was the mid-year update to my analytics. This resulted in a semiannual value level at $60.30, which has not yet been tested. The close of $76.28 on Sep. 30 was another input to my analytics and resulted in the fourth quarter risky level at $79.20, which was crossed to the upside on Oct. 25. The close of $80.44 on Oct. 31 was the most recent input, and the monthly risky level is above the chart at $96.42.

The weekly chart for Qualcomm

Weekly chart showing the share price performance of Qualcomm Incorporated (QCOM)
Refinitiv XENITH

The weekly chart for Qualcomm positive but overbought, with the stock above its five-week modified moving average of $85.14. The stock is well above its 200-week simple moving average, or "reversion to the mean," at $61.61. The stock spiked above this key moving average during the week of April 19. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 90.29 this week, up from 89.08 on Nov. 15. This strength makes the stock an "inflating parabolic bubble," which could prevent strength to its monthly risky level at $96.42.

Trading strategy: Buy Qualcomm shares on weakness to the quarterly value level at $79.20 and reduce holdings on strength to the monthly risky level at $96.42.

How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play. The close at the end of June 2019 established new semiannual levels, and the semiannual level for the second half of 2019 remains in play. The quarterly level changes after the end of each quarter, so the close on Sep. 30 established the level for the fourth quarter. The close on Oct. 31 established the monthly level for November.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently, I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble," as a bubble always pops. I also refer to a reading below 10.00 as "too cheap to ignore."

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.