The prominent chip maker had a stellar Q3, reporting both earnings and revenue beats.
The post-earnings rally had INTC reach its 52-week high of $47.30.
Since then, however, the stock has shed nearly 8.3% to reach its current level of around $43.34.
That said, for a number of reasons, shares seem poised for an upward move in the short term.
We’ll start with a couple bullish indicators on the chart…
Bullish Move – Chart Indications
#1 Multiple Support Levels: As you can see below, INTC has multiple support levels. The stock has taken support many times at its 50-day moving average (blue line) and has yet to break below that level. In addition, there’s gap support available at $41 in case the stock does indeed break down from its 50-day MA.
#2 Increasing MACD Bars: The MACD histogram is currently below zero and is showing shorter and shorter bars. It seems to be almost ready to move above its zero line. This is another bullish indicator.
Other Reasons for Bullish Bias
In addition to the bullish indicators I mentioned above, there are quite a few tailwinds for Intel in the near future which can push the company to high growth mode. In no particular order…
PC Market: Intel’s legacy business remains intact, as the chip-maker has launched its Xeon line of chips for the datacenter and Core i9 for PC market. Core i9 is a six-core/12 thread system that is at the cutting edge. Meanwhile, Intel’s Pentium and Celeron Chips are now being launched for low-cost PCs. The processors are based on 14nm Gemini Lake architecture and aim to provide a good balance between performance and connectivity.
Mobileye Acquisition: Intel’s smart acquisitions, like the sensor company Mobileye, have helped the company take a giant leap into the self-driving car game. In fact, Intel and Mobileye have already started working with BMW and Delphi Automotive on their self-driving cars.
Strategic Partnerships with MU: The partnership with Micron Technology will bring in opportunities in cloud computing, mobile, and AI (Artificial Intelligence) for Intel.
Apple Deal: There are also rumors that Intel is on the verge of landing a major chip deal with smartphone giant Apple. Apple is looking to integrate 5G networking chips in its future phones and Intel’s 5g modem seems to be a frontrunner for the deal. 5G wireless technology promises data speeds far beyond the 4G technology that’s currently in use today. The market is absolutely huge and Intel seems to be all set to become the key player in the field.
Steady Fundamentals: Intel has a forward price-to-earnings multiple of 13.5X, making it one of the cheaper options in the Chip sector despite a debt-to-equity ratio of 44.6%. Its current PE of 15.2 on a trailing twelve-month basis is also below the Semiconductors industry average of 25.2.
Risks to Consider
Our projected move higher may not play out as expected and the stock could sell-off for reasons like a blotched Apple deal, overall weakness in the sector, or weakness in the market as a whole.
Recommended Trade
If you want to get in on this trade, purchase shares of Intel at the current market price.
We’re targeting 11.9% potential upside in 45 days, so take profits if shares hit $48.5.
To limit risk, place a stop loss at $41.10. For those with lesser risk appetite, a stop loss can be placed at $42.5, just below the first gap support level.
- Entry point: You can enter the trade at the current market price ($43.34).
- Stop Loss Level: $41.00. If the stock breaks down below its second gap support, exit the trade.
- Target Price: $48.5. If the stock reaches $48.50, exit the trade.
For a risk of $2.5, our target reward is $5, making this a 1:2 risk-reward trade.
Good trading!
Tara
P.S. Please keep in mind that these trade ideas are for information purposes only. We’re not registered financial advisors and these aren’t specific trade recommendations for you as an individual. Each of our readers have different financial situations, risk tolerance, goals, time frames, etc. You should also be aware that some of the trade details (specifically stock prices) are certain to change from the time we conducts our analysis… to the time we publish it… to the time you’re alerted about it. So please don’t attempt to make any of these trades without first doing your own due diligence and research.
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