Trade of the Day: SWKS Stock Has Much Further to Fall

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Skyworks Solutions Inc (SWKS) — This wireless semiconductor company focuses on solutions for mobile communications applications. Its specialized products are especially suited to smartphones.

Capital IQ notes the company’s potential for growth as emerging markets adopt 3G and 4G technologies, which should generate more revenue per device than 2G phones. Its analysts have a “hold” rating on SWKS stock with a 12-month price target of $110.

But Skyworks Solutions has focused much of its marketing efforts on China with end-use developers like Apple Inc. (AAPL). So the recent news of the dramatic slowdown in China’s economy and the potentially negative impact that could have on Apple’s revenues has hurt SWKS stock. And other analysts have warned of weakness that could hit the stocks of suppliers to the major information technology companies.

Since China’s economic slowdown has been in the headlines, SWKS stock fell through a neckline at $95, confirming a breakdown from a head-and-shoulders formation. Following the break, shares plummeted through the 200-day moving average at $86.50, triggering more selling.

After a breakdown, stocks usually rally back to the break point — $95 in the case of SWKS stock — before proceeding lower to their final objective. Therefore, sell SWKS stock short at $95 with a downside target of $75. A stop-loss order should be placed at $101 to protect against a trend-changing rally and the possibility of a theoretically unlimited loss.

If successful, traders could achieve a profit of more than 20% within 30 days of the short sale.

SWKS Stock Chart
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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/skyworks-solutions-inc-swks-stock-trade-of-the-day/.

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