Stocks quoted in this article:
Since its earnings-induced bearish gap in mid-September, Skyworks Solutions Inc (NASDAQ:SWKS - 22.69) has embarked on a series of lower highs, touching a fresh eight-month low earlier in the month. Now, the shares are staring up at their formerly supportive 80-week moving average, which has descended into the $24 region. Furthermore, this area acted as a foothold for SWKS from February to September, but could now switch roles to serve as resistance.
Above that, SWKS could find an options-related speed bump in the short term. Despite the security's challenges on the charts, its Schaeffer's put/call open interest ratio (SOIR) stands at 0.38, indicating that calls comfortably outnumber puts among options expiring in the next three months. Plus, this ratio registers in the fifth percentile of its annual range, implying that near-term options traders have rarely been more call-skewed during the past 12 months.
In the front-month series of options, the out-of-the-money November 26 and 27 strikes are most heavily populated. Specifically, the 26 strike is home to nearly 6,000 contracts outstanding, and the 27 strike harbors close to 6,700 open calls. In the near term, this abundance of bullish bets overhead could translate into an additional headwind for SWKS.
The November 24 call has also been garnering quite a bit of attention lately, with open interest surging by more than 3,600 contracts during the past two weeks. Expanding on that, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open more than six SWKS calls for every put in the past 10 sessions. This ratio registers in the 62nd percentile of its annual range, hinting at a healthier-than-usual appetite for bullish bets of late. An unwinding of this optimism could exacerbate selling pressure on SWKS.
Elsewhere on Wall Street, the brokerage bunch is also in SWKS' bullish corner. Currently, the stock boasts 12 "strong buys" and one "buy" endorsement from analysts, compared to five lukewarm "holds" and not one "sell" or worse suggestion. Plus, the average 12-month price target on the equity stands at $32.56 -- implying expected upside of 42.3% to SWKS' closing price of $22.87 on Thursday, and in territory the shares haven't explored since April 2011. Should SWKS extend its retreat, a wave of downgrades or price-target cuts could weigh on the stock.
Investors expecting more downside for SWKS should consider buying the stock's in-the-money February 27-strike put, which was last offered for $5.50. However, it should be noted that SWKS reports quarterly earnings after the close on Thursday, Nov. 1. Traders looking to hedge against a post-earnings pop could simultaneously sell the stock's out-of-the-money February 19 put, which was last bid at $1.05.