Shares of microprocessor maker Intel Corporation (NASDAQ:INTC) have struggled in 2015, and the relentless selling pressure now has the stock trading at levels last seen about 12 months ago. As a result, INTC stock has also underperformed the broader semiconductor sector, but now increasingly looks oversold.
Intel Corporation is scheduled to report its latest batch of earnings on Wednesday, July 15, after the close of trading. Analyst estimates call for earnings per share of around 52 cents on revenues of $13.30 billion. (In the year-ago period, Intel earned 55 cents per share on $13.83 billion.)
Before looking at the charts, there are two things about INTC that I’d like to highlight:
- The technology sector tends to be a leading indicator for big-picture economic data, and semiconductor stocks like Intel are a leading indicator within the technology space. As such, the year-to-date weakness in INTC stock is not a great sign for global economic growth data.
- A large part of Intel’s sales is international, so barring any great hedging techniques, Intel is always exposed to the risks of a rising dollar, which translates its non-dollar earnings into fewer dollars when transferred back to the U.S.
INTC Stock Charts
On the multiyear weekly chart of the Intel stock price, you can see that in June 2014, INTC accomplished a major breakout past a line of resistance that stretched back to May 2014.
The upside momentum in the stock, as measured by the Relative Strength Index at the bottom of the chart, topped out a few weeks later. And while INTC stock continued to rise into December 2014, the price action since the big breakout move has largely formed a big head-and-shoulders pattern, and has since fully retraced back to the breakout line (i.e., the neckline of the head-and-shoulders formation.
The question through a technical lens is whether the previous resistance line (now support) will hold, or whether the head-and-shoulders pattern will lead to much lower levels in coming months.
To me, the retracement to the support line seems more important than the bearish head-and-shoulders pattern, and a bounce or outright trend reversal is possible in the weeks after Intel’s earnings report. From the weekly chart, the only part that could be more oversold is the RSI, which has not yet reached oversold readings that in the past led to better rallies.
Looking at INTC stock in a ratio versus the Market Vectors Semiconductor ETF (NYSEARCA:SMH) we see that Intel continues to look weak and at risk of breaking down further. While that risk is real, a contrarian would point out that a breakdown here could lead to a violent snap-back higher.
On the daily chart, INTC stock has seen relentless selling since its lower reaction high in late May. Intel still has some of its up-gap from June 2014 left to fill, however, which it would accomplish around the $28 area — and if the stock does reach this level, we might also see an oversold RSI reading on the weekly chart above.
Active investors and traders should now wait for Wednesday’s earnings to pass. A strong washout after earnings or a major bullish reversal could quickly set INTC stock up for a move back higher into the $33-$35 area within the next few months.
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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.