Despite Friday’s mild pullback, my indicators gave bullish readings for the second week in a row. This morning it looks like things may pick up because of news regarding a new stimulus package.
From a technical perspective, the S&P 500 index has broken out of its sideways channel, which has kept it bounded since early July.
Daily Chart of S&P 500 Index (SPX) — Chart Source: TradingView
The index crossed into an overhead resistance zone that spans from about 3,230 on the low end to roughly 3,330 on the high end. This could result in some choppy trading in the near term.
That added volatility makes it a great time for a short-term bullish trade on Intel Corporation (NASDAQ:INTC).
INTC’s Product Delays
Apple, Inc. (NASDAQ:AAPL) recently cut ties with INTC, announcing it would use its own chip provider from now on. That represents a huge loss of revenue.
And the world’s largest chipmaker also announced that it is delaying the release of its 7-nanometer processors because it isn’t producing enough. Now, these processors aren’t expected until 2022 or 2023, and the company’s rival Advanced Micro Devices, Inc. (NASDAQ:AMD) is already producing 7-nanometer chips.
While all of that is bad, INTC did manage to beat (admittedly low) earnings expectations. Year-over-year, the company’s earnings were up by 16%, and year-over-year, its revenue was up by 20%.
Many companies are seeing earnings beats despite posting worse performances than this time last year. INTC is doing the opposite.
I’m not arguing the stock wasn’t due for a correction, but I do think that if any company can navigate the difficult times ahead, it would be one with fundamentals like INTC.
INTC Gives Investors Time to Buy the Dip
The stock dropped by over 13% the day after reporting earnings, and part of that was because of its third-quarter forecast. The company expects softness in demand to offset the spike in demand it saw this quarter, and it does expect a 5% decline in non-GAAP revenues.
But the 13% drop in the stock only puts it closer to support at around the $50 level. That level acted as resistance very briefly after the crash in March, and now it seems to be holding the stock’s price up.
Daily Chart of Intel Corporation (INTC) — Chart Source: TradingView
The recent price drop makes this a perfect time for investors to buy into the world’s largest chipmaker, and I suspect some investors will take that chance.
Traders can take advantage in the short term with a naked put write.
Sell to open the INTC Aug. 14th $45 put at about $0.30.
Note: Be sure you are opening the weekly INTC options that expire on Friday, Aug. 14, 2020.
This is a high-risk trade, so take a small position.
About Naked Put Writes
A naked put write is a bullish position in which you expect the price of the underlying stock to increase.
InvestorPlace advisor Ken Trester also brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.
