Weekend Trader Alert

December 11, 2022

Open Positions Update

  • The Illinois Tool Works (ITW) March 17, 2023, 200-strike call reaches its time-stop this Monday, December 12. Close the position at a limit price within range of the current market price when you place the order.
  • The Berkshire Hathaway (BRKB) February 17, 2023, 300-strike call reaches its time-stop this Monday, December 12. Close the position at a limit price within range of the current market price when you place the order.

The following is this week's recommendation:

Skyworks Solutions, Inc. (SWKS)

Place a limit order to buy the Skyworks Solutions, Inc. (SWKS) February 17, 2023 92.50-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, December 9, this option was offered at $8.55. SWKS closed at $94.52 on Friday, December 9.

Do not attempt to enter this position after Monday's close.

Please use the following guidelines to manage the position:
  • Exit the position if the option is at a 100% gain from your entry price.
  • If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, January 9, close the position.
  • If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
The shares of Skyworks Solutions (SWKS) are forming a bullish pennant pattern on the charts. The equity is also holding the $88 and $89 support/resistant level -- a critical pivot point since June -- as well as its volume points of control (VPOC) on the one-year chart. Given this strong technical foundation, we're initiating a new long position on SWKS.

A shift in the options pits could send the shares even higher. The 90-strike peak put has acted as support for the past few weeks, while the stock's price consolidated. Further, the equity's 50-day put/call volume ratio of 1.24 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 96% of annual readings. This high reading, combined with its 10-day put/call volume ratio of 1.93 that ranks in the 97th percentile of readings from the past year, has led to big rallies in the past.

A further unwinding of pessimism amongst the brokerage bunch could also have bullish implications. While 17 analysts rate SWKS a "buy" or better, 14 still recommend a tepid "hold" or worse. This leaves plenty of room for upgrades, after the equity was downgraded multiple times in 2022.

Our recommended February 92.50-strike call has a leverage ratio of 6.5, and will double on a 15.9% pop in the underlying shares.

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