Have you missed the boat on Nvidia's booming AI-fueled run? Investors can still jump on the AI bandwagon with this beloved old chip. While the Nvidia (NVDA) gravy train may seem to have left the station for many, Qualcomm (QCOM) remains a compelling alternative for investors hungry to get involved in the AI revolution. On Qualcomm's recent earnings call, CEO Cristiano Amon hinted at the launch of the Snapdragon X Elite CPU alongside the “next version” of Windows, expected around mid-2024. While details regarding Windows 12 are still vague, the integration of AI-specific features indicates a significant focus on AI hardware. This aligns well with Qualcomm's Snapdragon platform, which is already primed for AI integration and extends to various industries. Earnings reactions aren't always predictable, and despite beating quarterly revenue and earnings estimates and providing solid forward guidance, QCOM fell 5% last Thursday. While this may seem counterintuitive, especially amid a broader rally in the chip sector, it could indicate a potential buying opportunity. The 6-month daily chart for QCOM is shown below. Note that after a 5% earnings decline, QCOM is showing signs of recovery, as indicated by higher highs, higher lows, and a higher Relative Strength Index (RSI). For an uptrend in QCOM, the trading structure I used here is called a bull call spread. You may find trading platforms using other names such as “discount spreads” or “long call spreads.” To create a bull call spread, I need to buy a $140 call and sell a $145 call as one unit. Trade Here is my exact trade setup: Buy a $140 call, February. 16 Expiry Sell $145 Call, February 16 Expiry Cost: $250 Potential Profit: $250 You chose February. 16 as the expiration of this trade is only 11 days away. The reason behind this is that NVDA's earnings are coming in February. 21, which represents a significant risk to trades in any chip stock. The goal here is to ride the wave of optimism as NVDA's earnings approach and close trading ahead of the earnings event. Profit Target If QCOM trades at $145 or more by the expiration date, this trade could generate a 100% return on the amount risked. QCOM 1Y Mountain Qualcomm, 1 year with 10 contracts, this is equivalent to risking $2,500 for the possibility of earning $2,500 -Nishant Pant Founder: https://tradingextremes.com Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader Reveals: (None) The above content is subject to our terms and conditions and privacy policy. This content is provided for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to purchase any securities or other financial assets. The Content is general in nature and does not reflect any individual's unique personal circumstances. The above content may not be appropriate for your particular circumstances. Before making any financial decisions, you should strongly consider seeking advice from your financial or investment advisor. Click here for full disclaimer.
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