Shares of semiconductor giant Intel Corporation (INTC) have traded higher by nearly 5% over the past four days after bouncing off a textbook support line. With just a handful of trading days left in 2014, this is no time to swing for the fences, so focusing on something like INTC stock where the risk/reward is clearly defined is better for the soul.
The day following Intel’s latest earnings report (October 14) also marked the lows of the October “correction” in the broader stock market, which helped INTC stock jump, rallying to levels not seen since 2001.
More recently, Bank of America reiterated its “Buy” rating on INTC stock with a price target of $43. INTC also made it into Bank of America’s “Top 10 Stock for 2015” list based on growth in the Internet of Things.
Even Morgan Stanley, which downgraded the stock right after the October earnings announcement, had positive things to say about computer hardware last week — believing the hardware could also benefit Intel.
Looking at the multi-year weekly chart, INTC stock has been a beauty for at least a few years as it behaved in near technical perfection and continues to look great from this angle.
After a major stock gets beaten as badly as Intel did between 2000 and 2002, it often needs a prolonged period of stabilization before it can resume an uptrend, particularly if the drop in the stock was due to structural reasons in the industry. With the burst of the Internet bubble, it took many of these “old tech” companies more than a decade to recover, including Intel.
Intel Stock Charts
On the chart we see that the 2002 lows in were marginally undercut during the financial crisis, which then marked the ultimate low for INTC stock before it slowly began to move higher. By June of 2014, INTC stock finally broke past a diagonal resistance line that stretched back to 2002. INTC has since reached the next layer of resistance which is the horizontal line from 2001 (red dotted line).
On the daily chart, we see that the October lows for INTC stock roughly coincided with the 200-day simple moving average (red line). By mid-November, INTC had broken to fresh year-to-date highs, but the stock then pulled back along with the broader market in early December.
On Wednesday, December 17, INTC bounced off the previous resistance line near $35.30 in a classic re-test of a previous resistance mark. INTC now has very defined support at this previous resistance mark and upside toward $39 or $40 in the near term.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
