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Fan Yang

I Won't Chase the Qualcomm (QCOM) Surge

Qualcomm $QCOM surged today after a settlement with Apple $APPL. I think the main point was that Apple will resume buying Qualcomm chips, which makes QCOM attractive at the $57-$58 price point to start this week. However, after a surge to above $70, I think the downside risk will be heavier or at least equal to the chance of further upside. 

QCOM Daily Chart

(click to enlarge)

Don't Chase:
- If you did not invest in QCOM when price was down around $50, or stalled around 56-$58, today's (4/16) pop might make you want to jump in now above $70.  
- However I think there is an equal chance price will dip to $60 as it would continue towards the 2014 and all-time-high around $81.90.
- I don't think price will fall below $55. If it does then, the market is bearish on QCOM. We can put a stop below $55. 
- I think QCOM is still in consolidation mode, with a slight bullish bias. 
- With this consideration, I would rather wait for a pullback to $60 before considering a buy. 

Here is a summary of today's news on Qualcomm:

Key Points:

  • Apple and Qualcomm have settled a royalty and patent dispute that went to trial this week in San Diego, California.
  • As part of the settlement, all legal action worldwide between the two companies will be dropped, and Apple will buy Qualcomm chips again.
  • Qualcomm said it expected a $2 increase in earnings per share and its stock rose over 20%.

Apple and Qualcomm have settled their royalty dispute, the companies announced in a press release.

The settlement includes a payment from Apple to Qualcomm as well as a chipset supply agreement, suggesting that Apple will buy Qualcomm chips for future iPhones. The companies did not say how much the payment will be.

Qualcomm stock rose more than 20% after the news broke, boosting its market cap by about $14.5 billion to to more than $84 billion. It’s Qualcomm’s best day since 1999...

From: CNBC

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