It’s been a long time since the “old school” technology stocks like Microsoft (MSFT), Intel (INTC) and Cisco Systems (CSCO) got attention from investors but their latest move is worthy of attention for investors looking to generate alpha in their portfolios.
So far, year-to-date, Intel has only slightly edged out the S&P 500’s returns as the stock is nearly 20% higher, 14% of those gains coming since early April as the stock has surged lately. The gains come as the company sees increased demand for their chips in the new popular Samsung hardware and as a new CEO takes charge of the semiconductor company’s future. For now, the fundamental story is attractive, despite mixed earnings results, but the technical picture is what traders are eyeing.
Click to Enlarge With its move to $24, Intel has set a technical course that should attract more buyers. The stock is in the process of establishing its first monthly close above its 20-month moving average since September 2012. This is significant as it marks the stock’s move into a technical bull market trend. The last time the stock made a move like this it went from $21 to $29, a 38% move.
In addition to the technicals, this stock has all of the signs of an under-loved stock that typically suggests that the stock is undervalued in the market. For instance, the current analyst recommendations for INTC show that only 30% of the analysts covering the stock have it ranked a “buy”. This suggests that the stock is ripe for upgrades, which would help increase buying volume on the stock.
Another sentiment measure that adds to the bullish argument is the current short interest. The latest report shows short interest of more than 224 million shares making it the most shorted company in the S&P 100. The high short interest suggests that a short squeeze is looming for INTC, also adding to the bullish case.
The technical, sentiment and fundamental pictures for INTC make it a bullish candidate as we head into the summer months. Consider the stock’s current price around $24 as a good entry with a target of $30. Options trader may want to leverage the stock’s potential move using a longer-term in-the-money call like the October 24 calls, which are trading for about $1.35 per contract. These options have the potential to more than double if our target of $30 is hit.
Trader X frequents national investment conferences and has developed several market analysis tools that harness the powerful combination of behavioral analysis and technical analysis. He has decades of experience as a registered broker.
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