Trading in shares of Skyworks Solutions, Inc.SWKS is relatively quiet on Monday, following last Friday’s rise of 8.5%. Analysts suggest there is a solid chance that the stock will continue to rally.

The shares are currently moving into a ‘gap,’ which could indicate a bullish trend. This is one reason why Skyworks is our Stock of the Day.

Understanding Stock Resistance and Uptrends

In financial markets, resistance is a price level where a substantial amount of sell interest exists. When a stock is trending upward, it suggests that there aren’t enough sell orders to satisfy all buy orders. Buyers often have to pay premiums, which drives the stock into an uptrend.

However, when the price approaches resistance, the situation changes. An adequate number of sell orders can now meet the buy orders, which leads to either a stop or a reversal of the uptrend.

The Role of Buyer’s Remorse in Resistance Levels

Resistance often forms due to buyer’s remorse, where investors who bought shares regret their purchase as the price drops. Many of these investors will sell if the price returns to their purchase point. For Skyworks, this dynamic explains why the $95.00 level transitioned from support to resistance.

Those who purchased shares around the support level may have regretted their decision when it broke in late October. When the stock rebounded to $95 in January, these investors sold, resulting in a sizable concentration of selling that established resistance at the former support level.

Analyzing the Gap on the Chart

As illustrated in the chart below, the stock gapped down in early February. This means it closed at one price but opened at a significantly lower price the following day, creating a visible gap on the chart.

Due to little trading activity between these prices, there was insufficient buying interest at the lower price point. Consequently, as Skyworks progresses back into the price levels it gapped through, there may be minimal sell interest.

Ultimately, buyers may need to be more aggressive, potentially pushing prices higher to entice sellers. This could lead to a rapid upward movement and might effectively ‘refill’ the gap.

Conclusion

In summary, Skyworks Solutions, Inc. appears well-positioned for potential growth as it navigates through key resistance levels. Investors should remain vigilant in watching price movements and market dynamics moving forward.

Read Next:

Image: Shutterstock