Skillz Makes A Bullish Breakaway And Options Traders Think There's More Where That Came From

After reaching an all-time high of $46.30 on Feb. 10, Skillz Inc SKLZ has been in a steep downtrend that has forced the stock back to late 2020 prices.

The iGaming sector has been beaten down the past few months following a lull in news catalysts.

On Wednesday morning, however, Skillz made an upwards breakaway indicating the bottom may be in and some bullish options traders agree.

The Skillz Chart: Skillz broke up from the downward sloping trendline that has pushed it south 72% from its highs. Finding support at the $12.50 mark, Skillz’ stock was able to bounce up to its next resistance level at $15.90. At midday, Skillz was attempting to break over that resistance level.

The bounce helped Skillz’ stock to regain the eight-day exponential average (EMA), which is bullish, but the eight-day EMA is still trending well below the 21-day EMA indicating the stock has a lot more work to do to make it into the clear.

Bulls want to see sustained bull volume over the coming days and for Skillz to reach its pop over its next resistance level at $18.10. If it can regain that level, it has room to push towards $23.23.

Bears want to see Wednesday’s bullish volume followed by bear volume to knock the stock back down below the descending trendline. If the Skillz falls back below the trendline, it will likely lose its support zone at $12.50 and could then revisit a lower support level at $9.95.

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The Skillz Option Trades: Below is a look at the notable option alerts, courtesy of Benzinga Pro:

• At 10:04 a.m., Wednesday a trader executed a call sweep, near the ask, of 200 Skillz options with a $15 strike price expiring on Dec. 17. The trade represented an $84,400 bullish bet for which the trader paid $4.22 per option contract.
• At 11.57 a.m., a trader executed a call sweep, above the ask, of 200 Skillz options with a $17.50 strike price expiring on May 7. The trade represented a $26,800 bullish bet for which the trader paid $1.34 per option contract.
• At 12.18 p.m., a trader executed a call sweep, above the ask, of 200 Skillz options with a $15 strike price expiring on April 23. The trade represented a $25,000 bullish bet for which the trader paid $1.25 per option contract.

Together traders are betting over $136,200 the share price is going higher.

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

SKLZ Price Action: Shares of Skillz were trading up 28.8% to $16.17 at last check.