The headlines that have plagued us during this year-long geopolitical dog fight with China wreaked havoc in the stock markets, especially in the semiconductor space. So it’s not a surprise to see a rally in Intel (NASDAQ:INTC) stock based on the most recent negotiations with China.
The rhetoric has been more cordial than expected from both the U.S. and China lately, which has alleviated some tension on Wall Street. For now, China tariffs are not the biggest problem. So Intel stock can trade based on its own chart and profit and loss statement.
To that, management will report its earnings soon so traders will have an opportunity to react to actual results and guidance from INTC. Rather than just sell it in droves on a tweet or a state media release from an obscure news agency in China. The best decisions come from reliable facts, and the only truths we know are the profit and loss statements that the company will deliver and the chart price action.
Fundamentally, Intel stock is not expensive as it sells at a price-to-earnings ratio of 12 and 3.2 times sales. So there is not a lot of fat to trim off it, even if they deliver a disappointing quarter. Technically, there is more good news for INTC than worries on its chart. All oscillators and moving averages suggest a strong momentum opportunity from the mid- and long-term perspectives.
INTC Stock Still Has Upside Potential
So those long INTC stock should stay in it until control changes hands from buyers to sellers. But for new positions, it is best to wait for the breakout confirmation above $53.50 per share. This would beat the highest failure level of the past few months. And above it, the INTC bulls have the opportunity to fill the giant open gap it left from the earnings back in April of this year. The bottom line is that as long as Intel stock is setting higher lows while attacking the $53 neckline zone, the bulls are in charge and everyday is an opportunity to set up the impending rally.
The last two efforts have failed but that doesn’t mean that the third one will as well. That’s why it is always best to wait for the confirmation of the break out even if it means missing out on the first few bucks of profits. Otherwise, if you’re itching to anticipate the rally, then you should sell puts or put spreads below the current price to leave some room for error.
For example, I can sell the INTC Jan 2020 $47 put and collect $1 for my effort. This way I don’t even need a rally to profit. As long as INTC stock stays above my strike, I retain my maximum gains. Worst case scenario, I would own INTC shares at $47 with a break even of $46 per share.
I have recently favored Advanced Micro Devices (NASDAQ:AMD) stock over INTC this year. It has had fewer fake breakouts. Just recently I closed my last bullish position in AMD stock so I can either reload that one after the earnings or grab the INTC stock breakout opportunity here when it happens. Alternatively, we must also note that Nvidia (NASDAQ:NVDA) is already in a breakout from $190 per share. This fallen angel has about $100 to make up before it reaches its accident scene from last October.
The Proof Is in the Pudding and Earnings Will Matter
In any of these cases, it is important to note that this week we are starting yet another earnings season. And so far the results have been better than expected.
Even the banks are getting bid, which is unusual. So there is hope still that this global malaise will abate and finally the stock market will make new highs sooner rather than later. I anticipate that we will chop around these levels in the general markets to establish the base and eventually we will come out of these next two weeks much higher than current levels. INTC stock can be one of the winners if management doesn’t spoil the opportunity with a lousy earnings report. But even then it has a strong band of support starting at $48 per share.