Intel Corporation (NASDAQ:INTC) is on fire. INTC stock broke out to highs not seen since the dot-com era following last month’s strong quarterly earnings report. Intel news points to an expanding presence in artificial intelligence and a fresh cadre of semiconductors to solidify the company’s market presence in both server and data center applications.
In short, now is the time to buy INTC stock.
Technically, INTC’s stock price broke out above long-term resistance at $45 due to follow through buying in the wake of last month’s earnings report. The shares even came within striking distance of $50.
Click to Enlarge However, INTC stock had been trading in overbought territory for a while — it was one of the drawbacks I saw in the shares heading into earnings. But INTC stock has staged an orderly retreat over the past week, consolidating into new-found support at $45.
The shares have nearly worked off their overbought status, and now appear poised to rally heading into 2018 — as long as the broader market holds up.
Sentiment is par for the course when it comes to INTC stock. According to Thomson/First Call, 22 of the 43 analysts following INTC rate the shares a “buy” or better, leaving room for potential upgrades. Meanwhile, the 12-month price target of $45.95 rests just above INTC stock’s current perch. Given Intel’s solid fundamentals, I would expect a price-target increase or two relatively soon.
Given the recent froth in the market, it’s not surprising that options traders are a bit wary when it comes to INTC stock. At last check, the December put/call open interest ratio arrived at 0.83, with puts on the verge of parity with calls among back-month options. This ratio is declining, however, indicating that sentiment is shifting bullish on INTC, which is a positive sign for the shares.
Overall, December implieds are pricing in a potential move of about 4.3% for INTC stock heading into expiration. This places the lower bound at $43.50 and the upper bound at $47.50.
2 Trades for INTC Stock
Call Spread: Traders looking for a turn higher for INTC stock following the recent consolidation might want to consider a Dec $46/$47 bull call spread. At last check, this spread was offered at 35 cents, or $35 per pair of contracts.
Breakeven lies at $46.35, while a maximum profit of 65 cents, or $65 per pair of contracts — a potential return of 85% — is possible if INTC stock closes at or above $47 when December options expire.
Put Sell: For a more conservative play, traders might be interested in a Dec $43 put sell position. At last check, this put was bid at 23 cents, or $23 per contract. The upside to this put sell strategy is that you keep the premium as long as INTC stock closes above $43 when December options expire.
The downside is that should SNAP trade below $43 ahead of expiration, you could be assigned 100 shares for each sold put at a cost of $43 per share.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
