The broader U.S. stock market closed the month of August on a high note, with healthcare stocks leading the charge from a sector perspective. Technology stocks, however, have also seen another round portfolio manager chasing into month-end. As a result, several semiconductor stocks such as Skyworks Solutions Inc (NASDAQ:SWKS) are waving bullish flag patterns that could soon see a resolve to the upside.
To be honest, I am always a little weary of month-end markups moves by portfolio managers, as there can be a tendency of a quick reversal in the beginning of the new month. Through the lens of technical analysis, i.e. price action, however, I must respect the signals — particularly if they give us well-carved-out patterns.
SWKS Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
To gain some perspective on the broader semiconductors as a group, I added the VanEck Semiconductor ETF (NYSEARCA:SMH) at the bottom of the first chart. Few market sectors or subgroups have acted as resiliently as the semiconductors over the past eighteen months. Note how the group looks ripe for another break higher.
Shares of SWKS stock, while also in a defined up-trend, over the past three months have been consolidating just below their previous all-time highs from June 2015. By my eye, this is healthy price action and could, all else being equal, ultimately lead to a break to fresh all-time highs.
To be clear and honest, there is no magic formula I am applying here but rather I am simply measuring and respecting the sector and group trends before digging deeper into charts such as that of SWKS stock.
Click to Enlarge
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that although SWKS stock has been in consolidation mode all summer long, the MACD momentum oscillator at the bottom of the chart did reach an extreme overbought reading in early July as the stock completed a 15% corrective period. While the MACD is still coiling up, it is looking ripe to put in a higher low.
At the same time, particularly the past few weeks of price action have coiled SWKS stock in a well-defined bull flag pattern, which as the name suggests indicates a resolve to the upside.
If and when SWKS stock can break and hold above the $107 – $107.50 area it could set up for a trade higher toward $115 as a first upside target. Any strong bearish reversal on a daily closing basis would signal a stop loss.
Check out Anthony Mirhaydari’s Daily Market Outlook for Sept. 1.
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