Stock Of The Day: Will Skyworks Refill The Gap And Head Higher?

Trading in shares of Skyworks Solutions, Inc. (NASDAQ:SWKS) is quiet Monday. This follows Friday's move higher of 8.5%. There is a good chance the stock continues to rally.

The shares are moving into a ‘gap'. This could be bullish. It's why Skyworks is our Stock of the Day.

In a financial market, resistance is a price level or narrow zone where there is a large amount of sell interest.

If a stock is trending higher it's because there aren't enough sell orders to fill all of the buy orders. Investors and traders who wish to purchase shares are forced to pay premiums and outbid each other. This forces the stock into an uptrend.

When it reaches resistance, the dynamic changes. There are enough sell orders to fill all of the buy orders. This makes the uptrend end or pause.

One of the main reasons why resistance forms is buyer's remorse. This happens when people regret buying if the price drops after. Some vow to get out if they can eventually do so at breakeven.

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So, if the stock rallies back to the price they paid, they place sell orders. This is why the $95.00 level for Skyworks converted from support into resistance.

Many who purchased shares around the support level came to regret doing so when the support broke in late October. When the stock rallied back to $95 in January they sold. The large concentration of this selling created resistance at a former support level.

As you can see on the chart below, the stock gapped down in early February. This means it closed at one price, and opened the next day at a price that was significantly lower. This shows up as a blank space or a ‘gap' on a chart.

Because there was no trading in between these prices, no one bought shares. This means that now that Skyworks is moving into the price levels it gapped through going in the opposite direction, there may not be a lot of sell interest.

Buyers may be forced to be aggressive and push the price higher to draw in sellers. This could result in a rapid move upwards. It could ‘refill' the gap.

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