There’s no question that Intel Corporation (NASDAQ:INTC) is a great company. Things are going very well for the famous chipmaker, having settled comfortably into Peter Lynch “stalwart” territory. However, there’s a massive problem with INTC stock behavior recently — and investors should be mindful.
Here’s a chart of the Nasdaq Composite. If you remember the dot-com bubble, then you know what this first chart shows. There was this truly insane run-up in the Nasdaq in 1999. You could not go wrong trading stocks during this period. I remember my glee as a relatively newcomer to the markets, making $70,000 that year.
The index was already going crazy in 1998. After the blowup of Long Term Capital Management, the index rose from about 1,600 to just under 3,000 in the space of a year. Then came the parabolic spike, where the index soared to 5,000 in less than five months.
Look at what happened next… or maybe you remember. I sure do. I lost exactly $70,000 in the year 2000. First came the drastic 30% correction, followed by some massive volatility, before the correction resumed and took the index right down to where it was before the parabola launched.
This wasn’t a one-shot thing; it happens all the time. It’s happened to many stocks, like Christopher & Banks Corporation (NYSE:CBK), Chico’s FAS, Inc. (NYSE:CHS) in 2005, Crocs, Inc. (NASDAQ:CROX) in 2007 and on and on.
Now, look at the chart on Ambarella, Inc. (NASDAQ:AMBA), courtesy of DecisionPoint:
And now, on to Intel:
Does this definitely mean that INTC stock is headed for a big fall? No. However, all the pieces are in place, and that means investors should be cautious. Because of the basing pattern, any drop would likely find support at around $37.
What you decide to do depends on your situation. Let’s run through them: