Must-See Charts: Should You Invest in Intel Now?
Computer chip giant Intel (INTC) - Get Report reports earnings late Wednesday. Intel's chart shows it has a history of earnings volatility.
Intel was a victim of the 2000 tech bubble, when shares plunged from an all-time high of $75.81 set in August 2000. Today's expanded weekly chart shows the Fibonacci retracement levels of the decline from this peak to the February 2009 low of $12.05. The multiyear high of $37.90 set in December 2014 is just above its 38.2% retracement of $36.40.
Looking deeper into the price volatility over the last two years, the stock traded as low as $24.87 during the Aug. 24, 2015, "flash crash." The daily chart below evaluates the Fibonacci retracement levels of the 34.4% decline from December 2014 high to this low.
Intel is a component of the Dow Jones Industrial AverageI:DJI . Since the low of $30.44 set on June 27 in the aftermath of Britain's vote to leave the European Union, the stock is up 16%, outperforming the 8.8% gain for the average. Intel has a dividend yield of 3.08% versus the yield of 1.55% for the 10-Year U.S. Treasury note. The stock has a reasonable price-to-earnings of 15 versus 19.7 for the Dow 30.
Analysts expect Intel to earn 53 cents a share Wednesday. On Monday, Canaccord raised its earnings estimates, indicating the recent personal computer sales data appears to be "better than feared." The company has a buy rating on Intel, which provides PCs with chips, and has a price target of $40.
The daily chart below shows how to trade Intel based upon the Fibonacci retracement levels from the Dec. 5, 2014, high of $37.90 and the Aug. 24, 2015, low of $24.87.
Here's the daily chart.
Courtesy of MetaStock Xenith
Intel stock trades around $35, up 1.7% year to date and 7.5% below the Dec. 5, 2014, high of $37.90. The stock has a solid gain of 40.9% since the Aug. 24, 2015, low of $24.87.
The horizontal lines are the Fibonacci retracement levels of the 34.4% decline from the December 2015 high to the August 2015.
From the August 2015 low the stock began to climb above the retracements beginning with the 23.6% level of $27.94 on Aug. 28 then above the 38.2% level of $29.85 on Oct. 2, the 50% level of $31.39 on Oct. 6 and the 61.8% level of $32.92 on Oct. 16.
The stock set its 52-week high of $35.59 on Dec. 29, which filled the gap to the Jan. 25, 2015 low of $35.57, which is a key chart horizontal. The 2016 low of $27.68 set on Feb. 11 retested the 23.6% retracement of $27.94. Note how the 38.2%, 50% and 61.8% retracements were key levels up and down between March 2 and July 6 as the stock surged on its favorable dividend post-Brexit.
The key levels to hold on post-earnings weakness begins with the 61.8% retracement of $32.92. The key level on post-earnings strength is to gap above $35.57 to challenge the Dec. 5, 2014 high of $37.90.
Here's the weekly chart.
Courtesy of MetaStock Xenith
The weekly chart shows a red line through the price bars, which is the key weekly moving average (a 5-week modified moving average). The green line is the 200-week simple moving average considered the "reversion to the mean."
The study in red along the bottom of the chart is weekly momentum (a 12x3x3 weekly slow stochastic), which scales between 00.00 and 100.00, where readings above 80.00 indicates overbought and readings below 20.00 indicates oversold. A negative weekly chart shows the stock below its key weekly moving average with weekly momentum declining below 80.00 in a trend towards 20.00.
The weekly chart for Intel is positive but overbought with the stock above its key weekly moving average of $33.17 and well above its 200-week simple moving average of $28.41. The weekly momentum reading is projected to rise to 85.91 this week up from 80.25 on July 15 becoming more overbought versus the threshold of 80.00.
This chart goes back to the bubble peak set in the year 2000 and note how the stock has not been able to sustain attempts to trend above its 38.2% Fibonacci Retracement of $36.40.
Investors looking to buy Intel should consider doing so on weakness to $33.01 and $30.51, which are key levels on technical charts until the end of 2016 and the end of July, respectively. My key levels for all of 2016 lag at $29.60 and $24.92. The $34.73 level should be a magnet through Sept.
Investors looking to reduce holdings should consider selling strength to $35.57, which is the key level on technical charts going back to January 2015.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.