Intel Could Finally Reward Unhappy Shareholders (INTC)

Frank
July 24, 2017
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Dow component Intel, Corp. (INTC) has underperformed the Nasdaq-100 and big tech stocks throughout this bull market cycle, with its endlessly limp price action becoming more prominent after the index broke out to an all-time high following the November election. The computer chip giant has failed to attract even modest buying interest during this period, stuck below resistance put into place more than 15 years ago.

The company has a fresh opportunity to play catch up after April 27 earnings, with a strong and forgiving tech environment offering a stiff tailwind. The current state of the PC market will garner the usual attention but Wall St. analysts may pay closer attention to reorganization plans as well as the Internet of Things (IoT) cloud computing initiative. Solid growth in that unit could do the trick, yielding a 15-year breakout that adds points at a rapid pace.

INTC Long-term Chart (1994–2017)

INTC

The stock rallied above the 1987 high at $1.31 (post five splits) in 1990 and entered a powerful trend advance that carved a broad rising channel into the March 2000 high at $72.69. It tested new resistance and turned sharply lower in August, joining the broad tech universe in the vicious Dot.com bear market. An oversold bounce failed at $26.78 in early 2002, establishing long-term resistance that’s still in play 15 years later.

It bottomed out at $12.95 in October 2002 and bounced to $34.50, with that level marking the highest high for the rest of the mid-decade bull market. A 2008 plunge dropped the stock to a 12-year low at $12.05 in March 2009, ahead of a recovery wave that failed to end the multi-year string of lower highs until 2012 when a rally lifted above the 2007 swing high at $27.99.

The uptrend reached 2002 resistance in 2014, marking the first trip into that level since a failed 2004 breakout attempt. It reversed into early 2015, triggering another failure, but has spent the last 31-months consolidating at or near that level. This resilience has slowly raised odds for a breakout that finally releases two decades of pent up bullish energy. Even so, timing the big event has proved painfully difficult, with six failures since September 2014.

Unfortunately for bulls, the monthly Stochastics oscillator crossed into a sell cycle in December 2017, with the technical headwind firmly in control as the stock heads into first quarter earnings. This tells us a positive reaction to the news may be be insufficient to trigger an immediate breakout, which makes sense given relatively narrow intraday ranges due to the stock’s 4.73-billion float.

INTC Short-Term Chart (2015–2017)

INTC

The December 2014 reversal at resistance (red line) triggered selling pressure into the August 2015 mini flash crash when the stock bottomed out at $24.87. It took 14 months for the subsequent bounce to return to resistance, triggering a late November failure, despite the post-election rally wave. Optimism ahead of January earnings was misplaced as well, triggering a reversal that’s yielded three months of dull price action in the mid-30s.

On Balance Volume (OBV) supports the bullish cause, holding at 2014 levels for the last 7-months. Meanwhile, a post earnings buying surge above $36.75 would break 2-month resistance, setting the stage for another breakout attempt. It could take several weeks to cover the short distance from that level into the red line so there should be plenty of time to get on board if buy signals go off, indicating that a long-term breakout is underway.

The Bottom Line

Intel has been congesting at 2002 resistance since December 2014, carving broad congestion that will complete a cup and handle breakout pattern with a rally to $38. That predicts that higher prices are getting closer, raising odds the chip giant will transform from laggard into market leader in coming months.

<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>

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