As a result of the recent multiweek rally, shares of Intel Corporation (NASDAQ:INTC) are now higher by more than 9% for the year. Although still lagging behind the rest of the semiconductor group in terms of performance in a big way for 2017, the recent rally has brought about a good amount of relative strength and could see INTC stock melt higher into year-end, although not in a straight line.
For some perspective, when I last offered my thoughts in INTC stock on Sept. 19, I said that the charts were increasingly pointing to a possible more meaningful breakout that could see the stock “moving well higher in coming weeks/months toward the $39-$40 area.”
Sure enough, INTC stock soon thereafter staged this breakout and last week reached my $39-$40 area near-term profit target.
INTC Stock Charts
On the first chart, I plotted shares of Intel versus the VanEck Semiconductor ETF (NYSEARCA:SMH) in what is called a “ratio chart. Note how the recent absolute strength in INTC stock led to a breakout also on this relative chart….
As a side note, ratio charts while fairly commonly used by institutional investors remain a largely foreign concept to the retail investing and trading community. I would highly encourage anyone to study up on the use of ratio charts, which I not infrequently display in this here column.
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear weekly chart, we see that the recent multiweek rally led to a clear breakout past previous horizontal resistance. In other words, the series of higher lows over the past year finally has resulted in a higher high being reached last week.
From a momentum perspective and as per the weekly MACD momentum oscillator at the bottom of the page we see that this breakout may just be the beginning of a larger move to the upside, through a multimonth lens.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
However and because a multi-timeframe approach is, in my eye, the only way to be a profitable trader and investor over time, on the daily chart INTC stock last week looks to have reached serious near-term overbought conditions.
Some backing and filling here with a possible mean-reversion lover into the $37-$38 area would be a constructive consolidation phase. This in turn could allow traders and active investors a better reward to risk entry once again for a trade higher in INTC stock into year-end. A price target around the $45 is reasonable toward year-end.
Check out Serge’s Daily Market Outlook for Oct. 9.
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