Shares of Intel Corporation (NASDAQ:INTC), along with other chip makers, perked up and rallied nicely last Friday. INTC stock itself closed the day higher by 3% and as a result also showed a promising technical move on the charts that could well have signaled the start of a next leg higher and back toward its November highs.
In September in this column, I offered that INTC stock had badly lagged the VanEck Semiconductor ETF (NYSEARCA:SMH), of which it was the second-largest holding. My case was that with the well-defined bull trend in the SMH ETF, it would likely only be a matter of time until INTC stock also joins the party for a meaningful rally. By the second half of September, INTC stock did just that and with a 30% rally into early November slipped into its complete bull costume.
This just once again goes to show the importance of understanding the sector and group rotation game, i.e. where money is being allocated to and thus which single-name stocks also stand a good chance of participating in a next leg higher through the lens of both absolute and relative strength.
INTC Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear weekly chart we see that the September through early November rally also resulted in a big multi-year breakout past horizontal resistance around the $37 area that had acted as resistance since 2001.
Through this lens INTC stock could have plenty upside left over the coming quarters and possibly years.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see the viciousness of the September breakout out of a very-well-defined consolidation period that lasted just about twelve months. The breakout continued in late October following Intel’s latest quarterly earnings report after which the stock gapped higher.
As is usually the case, however, when a stock takes its chart from a steep slope into a parabolic move, INTC stock began to stall just a few days after the earnings report and ultimately slipped into a much-needed consolidation phase. The pullback from early November into early December measured just about 10% and pulled the stock back to its yellow 50-day simple moving average.
Last Friday, the stock finally awoke out of its multiweek slumber and scored a marginal breakout of the “bull flag” pattern (black parallels) it had formed over the past month. While one day does not make a new trend, the breakout is promising and active investors and traders could play INTC stock for a next move higher back up into the high $40s while using the 50 day moving average as a last resort stop loss signal.
Check out Anthony Mirhaydari’s Daily Market Outlook for Dec. 18.
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