For most of this year, Intel Corporation (NASDAQ:INTC) played the role of market tease perfectly. Gyrating back-and-forth, the INTC stock price looked poised to break out at any moment. Moreover, positive sentiment returned to the broader sector, giving new life to previously down-in-the-dumps names like Micron Technology, Inc. (NASDAQ:MU).
It took a while, but the long-awaited lift in INTC stock finally arrived. Bullish sentiment entered the markets in mid-September, then built up leading to the disclosure of third-quarter-earnings results. When Intel delivered the goods with a solid performance, that gave the bulls all the justification they needed.
But as amazing as the recent run-up was in the stock price (shares jumped more than 33% between Sept. 1 and Nov. 1), the bears pounced just as quickly. Since early November, Intel shares slipped nearly 6.5%. This past Tuesday’s session was particularly painful, with INTC closing down 2.4% against the prior day.
You don’t have to be a technical analyst to recognize the problem with Intel Corporation. Heck, you don’t even have to believe in technical analysis. Instinctively, you know that this is a dangerous trend.
Adding to those fears is the fact that the chipmaking industry isn’t looking too hot in the capital markets. Low-cost rival Advanced Micro Devices, Inc.(NASDAQ:AMD) has been taking a beating. In the trailing three months, AMD lost 23%.
Even more stable rivals are feeling the heat. For instance, tech powerhouse NVIDIA Corporation (NASDAQ:NVDA) lost nearly 11% in the past five days. Given that INTC stock hasn’t received the upside benefit in the past few years that its rivals have, would now be the time to take profits off the table?
The INTC Stock Price Is Charting Worrying Patterns
Given the velocity of the decline, the natural inclination is to sell. Remember that it can take years to build a foundation and only weeks, if not days, to destroy it. The magnitude of the fear of losing money is often stronger than the magnitude of the joy in making money.
I’m sure that our own Lawrence Meyers would share this concern. He gave a personal story of making a tremendous amount of money during one year of the dot-com bubble, only to give it back shortly thereafter. His is a cautionary tale of not holding on too tightly no matter how much you believe in your investment.
He sees a similar pattern of the greed-and-fear cycle getting out of whack for INTC stock. Referencing tech firm Ambarella, Inc. (NASDAQ:AMBA), he argues that both Intel and Ambarella charted a parabolic blow-off. In Ambarella’s case, it triggered a long-term bearish phase that has yet to recover.
Could such a bearish reaction also sink Intel’s stock price? I admit, the patterns look worrying. However, whatever correction falls on Intel will likely be limited, relatively speaking. For starters, the scale of bullish enthusiasm is worlds apart between INTC and AMBA.
In January of 2015, AMBA shares were trading for around $50. By the time the parabolic bubble burst, AMBA had well exceeded $120. Also, the heart of the parabolic move occurred between mid-May to mid-June of 2015. In one month, shares exploded to a 60% profit.
Granted, the parabolic swing for Intel is no joke. Nevertheless, we’re still talking about a lesser magnitude move over a longer time frame. I think comparing the two patterns is useful, but be careful about forecasting excessively steep consequences for INTC.
Don’t Ignore Intel’s Fundamental Strengths!
Don’t get me wrong; the INTC stock price could get hit hard. As I previously mentioned, the entire chip-making sector is experiencing a correction. Traders are taking profits off the table that has given them tremendous riches over the past two years.
Plus, we have the holidays to consider. Traders are human beings, and they have personal obligations to cover.
And I think Meyers is correct in the near to intermediate term. INTC stock has skyrocketed, and given the entire context, a pullback is warranted. We might even see Intel share come back to the average price point prior to the parabolic swing; that unfortunately might mean somewhere around $35.
But we also have to remember the fundamentals. Against the competition, Intel is fiscally robust, and can weather many storms. More important, we have never seen a time where so many technical innovations have sprouted.
In other words, Intel isn’t just about making the chip powering your laptop. The company has opportunities in the vast array of consumer smart devices. Increasingly, computing is done in the cloud, which requires massive data centers.
You can say the same thing about the blockchain, and all the ancillary industries that will spark from it.
This is a world of opportunities for the tech sector. Moving forward, I anticipate a flight to quality, and there’s no better quality name than Intel. That’s why I’m still loving INTC stock, even with its current troubles.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.