I came across SWKS in a less than typical way this weekend. Scanning the front page of reddit I saw this article in which the author dissects an iPhone. In particular, I noticed that one of the chips in the image seen above was made by Sky Works, a small cap public company I had briefly heard about. And so this got me checking out the company and the chart, etc, etc.
I did a quick search to see if this information (that their chip was in the newly released iPhone) was widely know and published. In fact this article was the only one that came up, and it is from last December. To quote them:
"We are highly encouraged by what we believe is an Apple win for many reasons," Acree wrote in a note to investors. "First, at about $2 per front-end module, this new customer could contribute meaningful upside. Second, we believe Apple's decision to use SkyWorks over competing module suppliers is a material technology endorsement that should be acknowledged by investors."
So it appears there was no solid evidence, albeit confident speculation, that a SWKS chip might appear in the iPhone until now. I was hoping that I could get this post out before there was a headline about it on yahoo, but this Sunday afternoon the news appeared. More on the "iPhone effect" here. When this rumor broke last fall the stock hit a high of 7.97 which it has been unable to break since and more recently the stock has hovered below resistance at $7.50. Take a look at the long term chart here and the 6 month chart below:
The technicals look strong on this stock with the 50 dma providing support just below at 7.13 (a good place for a stop loss) and is rising while above the 200 dma. The tight Boulinger Bands suggest a big move soon and the RSI says it can move up for a while before becoming overbought. Any close above $7.50 would be a nice breakout and above $8 a big breakout. But considering the iPhone news and strong chart I like it on any move above Friday's high of $7.52 intra day. The depth of the most recent base suggests a target around $9.50 which is close enough to $10 to aim there. If we view the longer term weekly chart as an inverted head and shoulders pattern then the breakout price is $8 with a target of about $12, so lets be mindful of 8$ resistance and get to $10 first.
I don't feel like playing analyst today, but a quick glance at their fundamentals suggests that the company is growing and strong. The stock surged following their 2Q results (last quarter) in which they earned .08 versus .01 the year before, meeting analyst expectations. Revenue was up 5% and they projected earnings of .08 to .11 per share for the current quarter. If we guess they make somewhere in the ballpark of .40 eps this year that would give them a current PE of about 18, which is cheap these days. I couldn't find a date for their 3Q earnings release, but based on their last report I would think it will be in late July.
And now for a few bearish charts, lets start with the good ole' S&P 500:
Ok, so its not the end of the world for the broad market, but we sure are looking closer to a longer term downtrend maybe to the 200 dma (a 5% correction). Many will say "well, we are in a neutral market because the S&P looks range bound" and it certainly looks range bound. But if we look at the highs an lows closely we see that in fact the index has made a lower low and a lower high albeit only slightly. Furthermore, the S&P has failed to regain it's 50 dma on several attempts (you know how I feel about a broken 50 dma) and it just seems like there are sellers lying in wait to distribute into any meaningful rally, for example on Friday. I expect last week's lows to be broken now that the second quarter is over and it was a great one for fund managers. They now have some profits to take after they wowed their investors in the 2nd Q (April-June).
I don't want to say a whole lot about this one other than that AHM has no support below from the past 3 years and the stock is in free fall. The stock spent Friday consolidating after they scrapped their yearly guidance citing a surge in mortgage delinquencies and offered no new guidance to console investors. There was also an analyst downgrade to underperform. I can imagine the next major catalyst to move the stock lower will be the cancellation of their dividend.
Also, I have been watching CCRT in the wake of the weak financial sector. I am surprised the stock has been able to hold up so well given their strategy of providing credit to poor credit customers. See my post on CCRT for more on that. But from a technical standpoint it seems to be set up for a nice breakdown soon. If it breaks it's 200 dma at $34.50 the next stop is $33 on the way down to the prior lows near $25. I haven't forgotten about that hedge fund called Second Curve that apparently has a large interest in CCRT and has been heavily invested in sub-prime companies (details here). In other words, another fund that could implode. Pure speculation on my part here. Here's the chart I'm looking at.
Disclosure: I own AHM July $17.50 puts
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