Buy the Dip on This Sinking Apple Supplier

Skyworks stock's recent pullback could be a buying opportunity

Managing Editor
Dec 14, 2017 at 3:01 PM
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Since touching a record high of $117.65 in early November, the shares of Skyworks Solutions Inc (NASDAQ:SWKS) have dropped 19%. However, in the wake of the recent pullback in Apple suppliers -- exacerbated by bearish analyst attention today -- SWKS stock could be flashing a big "buy." Below, we'll take a look at the technical signal that's preceded pops for the tech stock in recent history.

SWKS stock recently came within one standard deviation of its ascending 320-day moving average, after a lengthy stretch above this trendline. One month after the last five pullbacks of this kind, the equity was higher 75% of the time, and up an average of 8.34%, according to Schaeffer's Senior Quantitative Analyst Rocky White.

Skyworks stock is was down 1% at $94.84, at last check, after analysts at Cowen waxed pessimistic on Apple suppliers. Specifically, Cowen cut its price target on SWKS stock to $115 from $120, citing concerns about lackluster iPhone demand. Another 8.34% rebound from current levels would put the currently oversold shares around $102.75 -- back above the century mark.

Daily Chart of SWKS Since Jan 2017 with 320 MA

Meanwhile, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHL), SWKS sports a 10-day put/call volume ratio of 1.37, ranking higher than 87% of ratios in its annual range. This suggests that puts have been purchased over calls at a faster-than-usual clips during the past two weeks. An unwinding of the recent pessimism in the options pits could also be a boon for Skyworks stock.

Despite the equity's long-term uptrend, short interest represents nearly a week's worth of pent-up buying demand, at SWKS' average daily trading volume. Should the equity once again bounce off its 320-day moving average, an exodus of shorts could also translate into tailwinds for the shares.
 

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