Qualcomm's Breakdown: Testing Support and the Options Overhang

The setup is clear: a violent sell-off has broken the trend. On February 5, shares plunged nearly 9% to $136 after the guidance reset, capping a brutal 20-day slide. The numbers show the pressure. Over the past month, the stock has fallen 24.48%. Even in the immediate aftermath, the 5-day change shows the selling hasn't let up, with shares down 9.4% in that period. This isn't a minor correction; it's a sharp trend break that has erased a massive portion of the year-to-date gains.

The market's initial panic seems to be fading, however. While the selling pressure is real, the intensity of the daily swings has cooled. The 1-day volatility has settled at 2.86%, suggesting the worst of the volatility spike may be over. The stock is now trading in a tighter range, with the daily amplitude around 2.84%. This could signal a pause, a technical consolidation after the violent drop, but it doesn't change the fact that the dominant trend is now firmly down.

The key level to watch is the 52-week low. The stock is now hovering just above that critical support at $120.80. A break below that level would confirm the breakdown is complete and likely trigger further selling momentum. For now, the market is testing that support, with the recent slowdown in volatility offering a brief reprieve but not a reversal. The technical picture is one of a stock that has been violently sold, is finding temporary footing, but remains under significant pressure.

The Levels: Testing the 52-Week Low

The stock is now squarely in the technical battleground. Shares are trading just above the critical 52-week low of $120.80, with the previous close at $136.30. This positioning sets up a classic support/resistance test. The immediate dynamic hinges on whether buyers can hold that floor or if sellers will force a decisive break.

A break below $120.80 would confirm the breakdown is complete. That move would likely trigger a wave of stop-loss selling and open the path to lower levels, potentially testing the psychological $110 mark. For now, the bounce from the February 5 low is the immediate bullish signal. It shows sellers are exhausted at this level, but the stock remains in a downtrend.

The key resistance to watch is the 20-day moving average. A daily close above this level would signal a potential trend reversal. It would indicate that the recent selling pressure has been absorbed and that buyers are regaining control. Until that happens, the 20-day MA acts as a ceiling, capping any rally attempts. The market is testing support, but the next major move depends on which side can take and hold this key level.

The Options Signal: High Implied Volatility and Crowded Puts

The options flow tells a clear story of fear and a crowded bearish bet. Deep out-of-the-money puts are showing high open interest and implied volatility, indicating traders are aggressively betting on further downside. Look at the $149 strike put, which has significant open interest and an implied volatility of 58.84%. That level is well above the current price, meaning these are speculative bets on a deeper crash. The spike in put options volume and open interest across the board reflects the panic that followed the guidance reset.

This creates a potential overhang. The sheer volume of bearish options contracts acts as a magnet for selling pressure; if the stock starts to rally, these puts could be exercised or sold, adding to the supply. Yet, this crowded trade also sets up a classic contrarian signal. If the selling pressure dries up and the stock finds support, the high implied volatility will start to compress. That compression, combined with a lack of new put buying, could signal the worst of the fear is priced in and the overhang is lifting.

The elevated implied volatility across the board is the key metric here. It reflects a market gripped by uncertainty, pricing in a wide range of potential outcomes for the next few months. This isn't just about a single level; it's about the market's fear of volatility itself. For traders, this high volatility environment is a double-edged sword. It offers premium-rich opportunities for selling options, but it also means the stock is primed for a sharp move in either direction once the uncertainty resolves. The options market is pricing in a turbulent path ahead.

The Path Forward: Catalysts and Key Watchpoints

The breakdown thesis hinges on a single, unresolved question: how long does the memory overhang last? The path forward is defined by near-term catalysts and clear technical levels that will confirm or invalidate the current downtrend.

First, watch for stabilization in memory prices and any signs of inventory normalization from smartphone OEMs in the Q2 earnings report. Management has stated the soft guidance is "100% related to memory," not demand for its chips 100% related to memory. The key will be whether OEMs begin to rebuild inventories in the second half of the year. A clear signal from Qualcomm's own Q2 results-perhaps a sequential improvement in handset segment revenue or a shift in management commentary toward easing constraints-would be the first major data point that the worst is priced in. Until then, the supply-side drag remains the dominant risk.

Technically, two levels are paramount. The immediate support is the 52-week low of $120.80. A decisive break below that level would confirm the breakdown is complete and likely trigger a wave of stop-loss selling, opening the path to lower targets. Conversely, a strong bounce and sustained hold above that floor would signal the market has found a new technical floor. For a trend reversal, watch for a daily close above $145. That level sits well above the current price and would indicate that the recent selling pressure has been absorbed, with buyers regaining control of the momentum.

The primary risk is that the 'memory overhang' suppresses handset shipments longer than expected, turning a supply issue into a prolonged revenue drag. The fear, as noted in the evidence, is that this could suppress handset shipments well into 2027. If that timeline proves accurate, the stock's recovery will be delayed, and the current technical weakness could persist for an extended period. For now, the market is testing support and waiting for the first concrete signs that the memory crunch is easing.