Intel's down, but not out
Despite minor damage to the charts, the stock looks good in the medium term.
By Serge Berger
Intel (INTC) held an analyst day last Thursday during which the company laid out its sales forecast for 2014. The stock rallied about 2.5%, but gave back all of its gains and more on a big-volume selloff the next day.
Intel told analysts about plans to increase mobile chip production in 2014, but disappointment hit after Chief Financial Officer Stacy Smith said the company's revenues won't grow in 2014.
On a more positive note, analysts took a liking to Intel's product road map. The company said it had somewhat missed the boat on mobile chips, but CEO Brian Krzanich predicted production of tablet chips would grow four-fold in the coming year.
The bottom line in terms of price action is that Intel's stock sold off to the tune of more than 5% on Friday as a result of the weak sales forecast, which missed analyst expectations of 1% growth year over year.
Despite the weak sales forecast and the ensuing selloff in the stock, the charts still look constructive to me in the medium term. And the longer-term chart below shows us why.
The stock's rally off the 2009 lows stopped abruptly when it bumped into a downtrend line connecting two previous lower highs dating back to 2002 and 2003. This led to a meaningful retracement of around 35% in 2012. However, INTC managed to hold lateral support and, more importantly, did not break to a lower low.
Since the stock's November 2012 lows, which coincided with the broader market lows, INTC has once again worked itself higher in a constructive manner, although the movements seems more volatile through a closer lens. Barring any major further breakdown that would take INTC below $22, the stock continues to look promising for an eventual retest of the April 2012 highs, which should lead to a big breakout.
Closer up on the charts, note that Friday's selling took the stock down to its first lateral support around $23.80, which has held for the past month or so and coincides with the stock's 50-day simple moving average.
The next support for the stock comes between $23 and $23.30, which is supported by the stock's 100-day (blue) and 200-day (red) moving averages. In the coming days, INTC needs to find a way back on its feet again. If it does, expect more upside for the stock.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the "Essence of Swing Trading" e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
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