Shares of semiconductor stocks as a group saw a major rally in 2019, but one that increased in intensity in the fourth quarter along with the broader U.S. market rally. One of the group’s largest holdings, Intel (NASDAQ:INTC) has lagged this move and just recently began to participate more in relative terms. The recent rally in INTC stock, however, is near-term overbought. A trade could be setting up following the company’s earnings report this week.
A useful and in my eye imperative part of analyzing an individual stock is how it stacks up versus its peers in the sector it is in. Over the years I have witnessed several instances where Intel stock was lagging its peers and then followed suit with major rallies.
While I do think that INTC in 2020 could do well in relative terms versus its peers, in the near-term it could offer a short-side trade. Particularly should the stock rally more after the upcoming earnings report.
Intel Stock Charts
On this first chart here note the relative underperformance of INTC stock versus its semiconductor peers in 2019. The stock only recently began to perk up in relative terms.
For all important perspective let’s have a look at where shares of Intel are trading through the longer term lens on the following chart.
Here on the multi-year chart we see that INTC stock, after the most recent and year-to-date rally, is once again tickling the very upper end of its long-term up-trend.
While this does not mean the stock has to stop dead in its tracks and reverse lower from here, it does likely offer that accelerating higher from here may provide challenges, i.e. that consolidation or a slower move higher may be in order.
Finally, on the daily chart we see how INTC over the past few months has worked higher in a stair-step manner, where consolidation phases were followed by breakout periods. Over the past few trading days the stock rallied off important horizontal support in the high $50s (previous technical resistance) but has now reached the upper end of trend of the rally since August 2019.
Trading INTC Stock
Intel is scheduled to report its next batch of earnings on Jan. 23 after the close of trading. While I am no fan of trying to get ahead of a company’s earnings report from a trading perspective, I do see an opportunity here to fade/short/sell Intel stock following the earnings report, particularly if the stock rallies further after the news.
As a next downside target Intel has the $60 area, which would mean-revert it back to horizontal support, which currently also roughly lines up with the yellow 50-day simple moving average.
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