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Trading Intel's Plunge After Disappointing Earnings

Intel is getting hammered after reporting earnings. Should it be up? That's not our call. Let's look at the charts instead.

Shares of Intel  (INTC) - Get Intel Corporation Report were under pressure Friday, falling more than 11% after a disappointing third-quarter earnings report.

Non-GAAP earnings were in-line with expectations, while revenue of $18.3 billion slightly edged out expectations of $18.2 billion.

For the quarter, gross margins came in at 54.8% vs. expectations of 56.8%. The 200-basis-point miss was disappointing and management said margin pressure was likely to continue in the fourth quarter as well.

However, management also gave a slight boost to its full-year earnings and revenue guidance, up from the prior outlook and slightly ahead of estimates. Ordinarily that’s enough to give the stock a boost. At the very least, it’s usually enough to keep it from cratering.

Maybe it’s because investors would rather go with Nvidia  (NVDA) - Get NVIDIA Corporation Report or Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report, both of which have growth and momentum while Intel does not.

Perhaps it’s because Intel’s last quarter was a mess and investors can’t handle another disappointment - that being the shortfall in datacenter revenue this quarter. Either way, it’s not a good look for Intel.

Nvidia and Advanced Micro Devices are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells NVDA or AMD? Learn more now.

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Trading Intel

Daily chart of Intel stock.

Daily chart of Intel stock.

With Friday’s decline, Intel stock is seeing a clean rejection from the 50-week moving average and knifing right through the 10-week moving average.

The decline has shares dropping toward its prior post-earnings low from this summer, which is at $46.65. Things could be worse, though.

Last time Intel reported earnings, shares gapped down by 13.6%, lost 16.2% that day and ultimately fell more than 22% over the span of six days. Bulls are hoping the stock won’t have a repeat performance.

Should the stock crack below the prior post-earnings low, it will put the 200-week moving average in play. Should shares close below that mark, it could put the coronavirus low in play near $43.

That $42 to $43 area has been an area of strong demand for Intel stock over the past few years. Should it drop that far, I would again expect this level to act as support.

Should Intel find its footing at or above the 200-week moving average, let’s first look for a move back toward $50 and the 10-week moving average. Above could put $52.50 in play and perhaps higher depending on the strength of the bounce.

For now though, bulls do not have the advantage. Let’s see if support holds.