Skyworks Solutions, Inc. (SWKS) shares rose more than 3% on Monday morning before giving up ground in the afternoon. Bank of America Merrill Lynch upgraded the stock by two notches from Underperform to Buy with a price target of $122.00 per share. Analyst Vivek Arya believes that 5G adoption is one of the most compelling and investable themes in semiconductors that will drive "exponential growth" in components required to upgrade the world's 1.4 billion smartphones and hundreds of millions of Internet of Things (IoT) devices.

Arya also notes that Skyworks derives just over half of its revenue from supplying Apple Inc. (AAPL). While the maturing iPhone product cycle and decline in global smartphone units drove consistent underperformance in radio frequency (RF) stocks over the past few years, the rise of 5G has improved expectations over the next few years as consumers are forced to upgrade to realize the benefits of the next-generation cellular technology.

Chart showing the share price performance of Skyworks Solutions, Inc. (SWKS)
TrendSpider

From a technical standpoint, the stock broke out from reaction highs earlier this month to fresh highs before giving up some ground. The relative strength index (RSI) rose to just below overbought levels with a reading of 69.06, while the moving average convergence divergence (MACD) is on the verge of a bullish crossover. These indicators suggest that the stock could see some consolidation, but the overall trend is higher.

Traders should watch out for some consolidation above trendline support at around $102.95. If the stock breaks down, traders could see a move to trendline support at $95.55 or a sharper move lower to the 50-day moving average at $92.07. If the stock breaks out higher, traders could see a move toward R2 resistance at $106.39 or a move further into new highs.

The author holds no position in the stock(s) mentioned except through passively managed index funds.