Easy Intel Bulls, Stock Is Still a Prove-It Situation

Intel is starting to trade better, but still needs to prove it's got momentum to get traders on board. Let's look at the chart.
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Shares of Intel  (INTC) - Get Report were running strong on Tuesday, climbing as much as 7.6% at one point on the day.

However, the stock ended higher by just 4.9% before dipping about 1.5% on Wednesday. In all, shares are up about 3.4% for the week, but bulls were hoping for a better reaction.

The stock initially spiked on Tuesday on news that hedge fund Third Point is calling for a review of alternative options.

Intel seems open to working with Third Point, pointing to possible value creation through shareholder activism.

With its low valuation and solid dividend, there could be room to the upside if Intel can execute while creating value for its shareholders. It’s particularly important for the company to do so given the momentum we’ve seen in Nvidia  (NVDA) - Get Report and Advanced Micro Devices  (AMD) - Get Report.

Before bulls get too excited though, let’s look at the chart.

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Trading Intel Stock

Weekly chart of Intel stock.

Weekly chart of Intel stock.

While Intel was hammered from its pre-coronavirus 2020 high like the rest of the market, its recovery has been much more deflating. Up just 13.5% from the March low, Intel stock has made a series of lower highs all year.

That’s while the Nasdaq is up 95% from its 2020 low.

While the news of activism is a positive for Intel, it’s not -- in the words of Real Money’s Eric Jhonsa — a silver bullet. In other words, these things take time.

On the weekly chart above, one can see that Intel is struggling against several key moving averages, as well as the volume-weighted average price (VWAP) measure.

A close below the November low at $48.50 could open up the stock to a test of the December low at $45.24. Below that and the $42 to $44 zone will be in play, which has been long-term support for Intel stock.

On the upside, we need to see Intel clear the 10-week and 200-week moving averages, which it struggled with this week. If it can't do that, it's hard to get too excited. 

Above the December high at $52.65 puts the 50-week moving average in play, followed by the October high at $56.23.