Conditions have quickly gone from gone from dismay to sell-in-May in a very big way for Intel Corporation (NASDAQ:INTC) the past couple weeks. And for INTC bulls, while there’s a technical case for a bottom, I’d suggest waiting patiently. Remember, there’s always a line somewhere. Let me explain.
Just when INTC investors thought it couldn’t possibly get any worse, Thursday proved otherwise. Following late April’s weak guidance and the company’s first decline in data center sales and profits in a decade as its earnings centerpiece, Intel’s first analyst day in over two years served to rattle already frazzled investors even more.
INTC shares tumbled more than 5% and towards four-month lows as detailed positive trends for free cash flow, capital allocation and operating margins were derailed by surprisingly weak gross margins guidance and declining market share amid growing competition from rival Advanced Micro Devices (NASDAQ:AMD).
Along with Intel’s continued difficulties off and on the price chart, Thursday’s confessional saw BMO Capital Markets downgrade shares to market perform, as well as receiving cautious commentary from brokers Cowen & Co. and Bernstein.
Intel Stock Monthly Price Chart
I like to say there’s always a line somewhere when it comes to the price chart. For bullish investors, it’s a warning to guard against technically coming up with overly aggressive reasons to remain long or initiate a purchase in the face of an adverse price move.
Right now, INTC stock is showing those supportive-looking lines in spades on the monthly view. And that could be very costly if bulls aren’t careful. Rationalizing a low in Intel shares based on the next level of support, whether it’s a trend-line or Fibonacci level as I’ve detailed, could take bulls from today’s $46 down to around $28 a share.
That’s not to say investors shouldn’t buy INTC stock as key price levels are being tested. However, having a game plan and exit strategy is critical to avoid potentially deep losses.
Buying Intel Stock
My recommendation for buying into Intel stock’s uptrend is to wait for a stronger entry. This is likely to look like one of two scenarios on the INTC price chart.
The first is if a technical floor is found near current levels and Intel’s steepest trend-line and highest layers of Fibonacci support manage to hold the stock price above $45. I’m not holding my breath. But if a bullish candlestick pattern can develop over the next couple weeks with support still intact, buying INTC stock makes more sense in conjunction with a stop-loss.
The second situation where price action in Intel might warrant buying shares is continued persistent weakness. I’d personally avoid buying shares in between $40 to $45. The next area where INTC stock has the backing of both an uptrend line and Fibonacci supports and where I’d be interested in buying shares is roughly from $37.50-$40.
Here, too, to avoid bad sentiment producing even weaker stock action while positioned, waiting for confirmation of a low on the weekly time frame and having an exit strategy in hand is the favored approach.
Investment accounts under Christopher Tyler’s management currently own positions in Advanced Micro Devices (AMD) and its derivatives but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.