American semiconductor company, Skyworks Solutions Inc. (NASDAQ: SWKS) shows signs of an upcoming price surge according to its latest charts.
#1 Falling Wedge Breakout: The daily chart of SWKS shows that the stock was trading within a falling wedge pattern during the past 6 months.[hana-code-insert name=’adsense-article’ /]This is marked in the daily chart in dark blue color.
Currently, the stock has broken out of this falling wedge pattern with a high volume.
A breakout from a bullish pattern like Falling Wedge Pattern shows that the stock has gained momentum and has the potential to move further up.
#2 Double Bottom Breakout: Within the falling wedge pattern, the stock had formed a double bottom pattern as marked in the daily chart below.
It has currently broken out of this double bottom pattern, which is a bullish reversal pattern, indicating that the stock would possibly move upwards.
#3 Trading Above MA: The stock is currently trading above its 50-day moving average (yellow line), indicating a bullish bias for the stock.
#4 High Volume Bullish Candlestick: The latest candlestick is a high volume bullish candlestick, indicating strength.
#5 MACD crossover: In the daily chart, the MACD (light blue color) has crossed above the MACD signal line (orange color). This indicates a possible bullish setup.
#6 Resistance-Turned-Support Level: There was a long-term resistance level in the daily chart (shown as the brown dotted line in the chart) at around $100 which was attempted to be crossed multiple times. The stock has now crossed above this level with high volume. This implies that the resistance level would now act as the support for the stock.
#7 Uptrend Unbroken: As you can see from the weekly chart of the stock, the uptrend is still unbroken for the stock. This is because the stock has been forming higher highs and higher lows.
#8 Upcoming MACD crossover: In the weekly chart, the MACD line is about to cross above the MACD signal line. This is also a possible bullish sign.
#9 Bullish Engulfing: The weekly chart shows that the latest candlestick pattern is bullish engulfing. This is a sign of possible bullishness.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the stock between $100 to $103.15
Note: You can purchase half the intended quantity of shares of SWKS at the current price of $103.15 and the remaining quantity if the stock corrects to falling wedge pattern breakout level of $100.
TP: Our target price is $110 in 3 months and the second target price is $125 in 6 months based on the falling wedge pattern breakout.
SL: To limit risk, place a stop loss below $96.20. Note that this stop loss is on a closing basis.
Our target potential upside is almost 22% in the next 3-6 months.
When entering at an average price of $101.50, for a risk of $5.30, our first target reward is $8.50 and second target reward is $23.5. This is a nearly 1:2 (for TP#1) and 1:4 (for TP#2) risk: reward trade.
In other words, this trade offers nearly 2x to 4X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the falling wedge pattern breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
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