Are Titans truly invincible?

Prior to last Friday’s ruling by Federal Judge Yvonne Gonzalez Rogers on the trial between Epic Games versus Apple, many of us doubted that the political powers in the U.S. possess the will to penalise or cripple their titans.

This is understandable since the enormous cash piles and the sheer influence they wield over different lobby groups made it a seemingly impossible and futile path to take. Yet something seemingly changed yesterday.

Even though Judge Yvonne stopped short of labelling Apple a monopoly, she did agree that Apple’s practice of preventing other payment systems for the App store was anti-competitive and issued a permanent injunction against it.

Whilst there are still legal arguments over the context in her lengthy ruling (e.g. in-app buttons versus external links), the important point to ATEC is that there is now a possible path forward for game and app developers to by-pass Apple’s payment system, and in doing so, deny Apple the lucrative and controversial 30% fee.

According to documents from the ruling, some 70% of Apple’s App Store revenues are generated from gaming apps alone. This is why we can be sure that the gaming developers’ community will be all over this new opportunity.

Sure, technically, the ruling only impacts U.S.-based companies, but since the precedence is now set, we can also expect Epic and others to take their fight against Apple to other jurisdictions in time. It is also true that attention will turn towards Google and their Play Store practices.

So is Apple’s entire US$70 billion App store revenue at stake? Perhaps not immediately, but then change always starts slowly, then suddenly doesn’t it? It appears a little stretched to ATEC to think that the U.S. will be as harsh as Beijing when dealing with their titans, but we guess given how the market is positioned in these names, the market can easily judge way before we will ever ascertain the answer.

Source: Bloomberg

From our technical framework, as shown above, we believe there is now an increasing chance Apple’s stock might have finished five up-cycle waves up, at multiple time-frames.

If our scenario is right, this means Apple’s stock might be at the cusp of a rather severe three-wave correction — of which time and depth we have no idea of at this point. To be sure, under certain rules of the Elliot Wave principle, we can only confirm the scenario when US$135 is broken.

But rather than waiting till then, for sure, we would not be long this name now.