SWKS Stock: Set to Test an All-Time High
Skyworks Solutions Inc (NASDAQ:SWKS) stock has appreciated considerably since my last report on this investment, “Skyworks Solutions Inc: SWKS Stock Chart Implies HUGE Upside,” was published on January 20. I correctly described what happened in the months following my report as Skyworks Solutions stock appreciated to the tune of 24.7% and it continues to forge new 52-week highs.
The view that Skyworks shares were set to appreciate was generated by deciphering the price action and indications found on the SWKS stock chart. Yes, as silly as this notion may sound, this is exactly how I generated that bullish view. This method of investment analysis is known as technical analysis, and it has become the cornerstone of my investment strategies because of the tremendous value it provides. This tremendous value is why I have been studying this method of analysis for nearly two decades.
I am focusing on Skyworks Solutions stock once again because the indications continue to support an advance, and I would also like to outline key levels that I would use to define my risk in this potential investment.
The following SWKS stock chart illustrates the indications that have been supporting an advance.
Chart courtesy of StockCharts.com
Skyworks Solutions stock started to tend higher in July 2016, and this bullish price action was responsible for the generation of a golden cross. A golden cross is a bullish signal that is generated when the faster 50-day moving average crosses above the slower 200-day moving average. This indicator is popular among the investment community because it suggests that a bull market is on the horizon. I have found that it is wise to trade in the direction suggested by this influential indicator, and this is one of those times where it was wise to pay heed.
In the months after this bullish indication was generated, Skyworks Solutions stock left a gap on the price chart following a better-than-expected earnings report. I labeled this gap a “continuation gap” because this gap serves to indicate that the trend is accelerating in the direction that began in July 2016. Continuation gaps are known to mark midpoints, and with the previous all-time high sitting at $109.71, this fits well with that premise. As a result, I am expecting the previous all-time high of $109.71 to be tested at a minimum.
This bullish view is being supported by the accumulation/distribution line (ADL) in the lower panel of the price chart above. The ADL is an indicator that uses volume to compute buying and selling pressure. It is produced by cumulatively adding volume on up days and subtracting volume on down days, in relation to where the stock closed compared to the high and low of the day.
In essence, this indicator computes money flow.
This indicator continues to make new highs, suggesting that this investment is being accumulated. This reinforces that current move towards higher prices because there is more money flowing into SWKS stock than there is flowing out.
The following price chart illustrates that all these indications have come within the context of healthy constructive price action.
Chart courtesy of StockCharts.com
The price chart above illustrates that the move towards higher prices has been within the context of healthy constructive price action. Healthy constructive price action contains two waves. An impulse wave that serves to advance the price of the stock, and a consolidation wave that serves to alleviate overbought conditions and set up the next advancing impulse wave.
The current structure is very special because the current consolidation wave has become a running correction. This orderly range-bound action that is contained within a price channel is effectively alleviating overbought conditions as the trend continues to progress. This sets up a possible scenario where an impulse wave can quickly develop when this investment breaches its all-time high at $109.71. Such a feat would open the door to much higher prices because no overhead resistance exists above this price point.
If we take a quick peek at the previous chart, we will notice that this consolidation wave is developing right on top of the 50-day moving average. This confluence of support is suggesting that this is where I could define my level of risk if were looking to set up an applicable trading strategy. Two levels that coincide at one price point suggest that support at this price point is significant, and if, for any reason, the stock price breaks below it, it is only wise to pay heed.
Bottom Line on Skyworks Solutions Stock
I am bullish on Skyworks Solutions stock because the style of investment analysis I employ suggests that such a view is warranted. I believe that the previous all-time high at $109.71 will be tested, but until it breaks above it, I would use the 50-day moving average that coincides with consolidation wave to define my level of risk in SWKS stock.