Qualcomm Soars 45% As Apple War Ends. More to Come?
For the past few years, the two titans of the smartphone era, Apple and Qualcomm, have been at war with each other. Many analysts believed the two companies were destined to be embroiled in a long and epic legal battle after Apple sued the chipmaker for $1 billion in 2017.
However, on April 16, 2019, everything changed.
In this article, we explore the issues between the two titans of the smartphone era, why Qualcomm stock soared nearly 45% in just a few days, and whether or not there is more room to go.
Qualcomm vs Apple: The Battle So Far
Qualcomm has been a leading player in making the modem chips which allow smartphones to connect to 3G and 4G wireless data networks. However, Apple, and other smartphone makers and antitrust regulators, accused Qualcomm of abusing its dominance by charging excessive royalties.
In 2017, Apple not only sued Qualcomm for $1 billion in damages but they also stopped its manufacturers from paying billions of dollars owed to Qualcomm for the modem chips built specifically for iPhones and iPads. In fact, Apple turned to Intel to provide for its demand for modem chips.
Both companies have been involved in litigation over patents and an array of other issues all over the world. Apple filed suits in the United States, China and the UK, while Qualcomm, filed countersuits in Germany in China.
Qualcomm vs Apple: The Extraordinary Surprise
On April 16, 2019, both companies surprised the market by settling all of their patent and royalty suits filed against each other. This alone was enough for Qualcomm short sellers to exit their trades - helping the stock pop higher. But that was not all.
Both companies also announced they had agreed to a six-year deal for Qualcomm to supply Apple with modem chips, as well as an agreement over the licencing rights. Qualcomm's stock price jumped over 20% on the day and again the next day, marking a near 45% gain in just a matter of days. Is there more room for the stock to go even higher? Let's take a look at the technical price chart for Qualcomm.
Trading Qualcomm's Stock Price
Source: Admiral Markets MT5 Supreme Edition, Qualcomm, Weekly - Data range: from December 8, 1991, to April 22, 2019. Accessed on April 22, 2019, at 10:30pm GMT. - Please note: Past performance is not a reliable indicator of future results.
Stock prices which move in such dramatic ways are not common and are difficult to predict to trade beforehand. However, the move higher in the stock price can help traders increase their directional edge. After all, the six-year deal Qualcomm and Apple have agreed on is likely to help the chip maker's bottom line - making it an attractive stock for some investors.
The technical picture of Qualcomm's price chart is also exhibiting some interesting characteristics as it has formed an ascending triangle wedge pattern. In these patterns, the stock price often finds resistance at a fixed horizontal price level while creating major swing higher low cycles. The pattern suggests that if a break from the fixed horizontal price level is successful, any short sellers defending the level will exit their positions further fuelling a rise in prices.
If Qualcomm can break its horizontal price level of $82, there are some traders who will look to trade in the direction of the break until the next horizontal price level which is marked by the all-time high price level of around $100. Of course, there are still some obvious risks to any trading opportunity on Qualcomm, as the stock price is still in a trading range exhibiting volatile price swings and could still fail at its horizontal price level:
Source: Admiral Markets MT5 Supreme Edition, Qualcomm, Daily - Data range: from October 19, 2012, to April 22, 2019, accessed on April 22, 2019, at 10:45 pm GMT. - Please note: Past performance is not a reliable indicator of future results.
With a volatile stock price, the use of advanced risk management tools is essential. Admiral Markets' Volatility Protection settings help traders minimise volatility risk and could be the addition to make in your trading for this year.
Conclusion
With investors suddenly turning bullish on Qualcomm's stock price - after its surprise, and historic, agreement with Apple - how will you be trading it this year?
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