Qualcomm makes bullish break

Qualcomm (QCOM) raised its guidance for both quarterly and full-year earnings before market open today. The stock had been in recovery mode since experiencing a very large bearish gap down in late January of this year. But few expected such a positive fundamental turn in the business, and hence the shares moved quickly higher, with a bullish gap resulting. The stock has been repriced instantly in light of new information.

Price is beginning to fill the prior bearish gap, the big empty zone to the left of current price. Trader lore claims that in time all gaps are filled, which may be one reason that moves back into gap areas, whether bearish or bullish, often see increased momentum.

There is a bullish pattern that traders should be aware of on the chart. Actually, there are two, but the one in question today is a bullish, inverted, head-and-shoulders bottom.

If you close one eye and look at the price action before and after the big peak on the chart, you can see there was previously one half of a bearish head and shoulders top before this smaller bullish head and shoulders bottom formed. Rather than getting a right shoulder on the bearish pattern, it just gapped. It isn't that unusual to see these types of patterns follow each other, with each being the opposite of the preceding pattern.

The breakout for the smaller bullish bottom is the yellow neckline, last at the $41 area. The top of the pattern, its full potential, is to the $46 area. This is right where the stock previously broke down.

The second bullish pattern, which has already completed, is just below that yellow line, It was a somewhat stunted bullish pennant which never came to a point. It completed right where the shares opened today at the $42.54 level, and this is now key support.