We looked at Skyworks Solutions (SWKS) at the beginning of the month, and we said, "Risking a close below $104 I would look to buy SWKS at current levels and on strength above $115 looking for gains to the $135-$140 area into year-end." SWKS moved above $115 yesterday so we would consider ourselves long risking a close below $104.
Prices are down today so let's see if we bought a false breakout or if our original thinking is still on track.
In this daily bar chart of SWKS, below, we can see the push upwards and the quick retreat. Prices encountered resistance in the $109-$110 area from June through October so in theory this resistance area should become support when prices break above the resistance. There is a small "but" here in that the upthrust above $110 could be a "bull trap" -- a pattern where prices breakout over resistance but then quickly reverse and retreat, trapping the traders who went long above $110 with bad positions. I do not have a crystal ball so I do not know exactly what will happen. Meanwhile prices are above both the rising 50-day and the rising 200-day averages. The OBV line is rising and the MACD oscillator is above zero.
In this weekly bar chart of SWKS, below, we can see that today's weakness has not hurt the indicators. Prices are above the rising 40-week moving average line, the weekly OBV is pointed up and the MACD oscillator is crossing to a fresh buy signal.
In this Point and Figure chart with the volume at price data added on the left side we can see that there should be good support from $108 on down.
Bottom line -- Yes, Virginia, there are such things as false breakouts. If this is a false move then having that sell stop in place will be a good idea.