Semiconductor stocks have suffered losses this week as part of the broader tech sell-off, but one trader is betting on a recovery and eventual breakout in one name.
Todd Gordon, managing director of Ascent Wealth Partners, is betting on Skyworks Solutions, which largely makes cellphone chips, as a play on the 5G rollout.
"They're trying to diversify away from just mobile phones and into the Internet of Things, specifically 5G. They're trying to connect all of our devices to the internet and to each other called the Internet of Things. It's creating a traffic jam in the current 4g network. 5G is designed to open up that traffic jam with faster speeds and more lanes of traffic," Gordon told CNBC's "Trading Nation" on Thursday.
Skyworks should be well positioned to capitalize on a 5G push given its investments in smart homes, autonomous driving and wearables, says Gordon. He estimates that 5G should provide 100 times the download speed of 4G.
The charts are also setting up for a bigger break higher, he says.
"You can see that Skyworks has broken out at about the $130 mark, there's a high here on that earnings report [in late July]," said Gordon. "So, from $142 down towards about $135 would be deemed support. If you don't have the position already, you could use any pullback here above [$135] to add this stock to your portfolio, looking for new highs."
Skyworks traded at $138 on Friday. It has fallen nearly 5% this week as part of the broader market sell-off.
To take advantage of a move back to highs set on Wednesday, Gordon is implementing a call spread - buying the 140 strike call with Nov. 20 expiration and selling the 160 strike call.
"In real dollar terms, that's a $2,000 spread. You'll have to pay about $863 ... so the max profit would be $2,000. Subtracted from the premium paid at $863 leaves the max potential profit at about $1,137," he said.
Disclosure: Ascent Wealth Partners holds Skyworks.