Shares of microchip maker Intel Corporation (NASDAQ:INTC) were in a sea of hurt for most of 2015 so far as they showed relative weakness versus the broader market and ultimately saw a 30% decline into the late-August selling. Since then, however, INTC stock has shown some promising signs through the lens of technical analysis, which includes a higher low last week and a push past a host of technical resistance levels.
Bearing any sudden sharp reversal, INTC stock looks to be a promising play in the fourth quarter.
They say shares of semiconductor manufacturers such as Intel tend to have leading indicator qualities as they begin to show weakness before the broader indices do and likewise begin to perk up before better broader market rallies.
The price action year-to-date for INTC stock has certainly been a leading indicator for the broader market. The question now is whether the recent relative strength in the stock is also trying to foreshadow a better seasonal bounce in the broader US equity indices.
INTC Stock Charts
Taking a glance at the multiyear weekly chart of INTC stock, we quickly see that in June 2014 it accomplished a major breakout move above horizontal resistance that has been in place since 2004 around the $28-$29 area. The overshooting rally in the second half of 2014 into early 2015, however, began building a bearish head-and-shoulders pattern that ultimately saw the stock capitulate back below the previous multiyear line of resistance before bouncing back.
Through this lens, Intel stock accomplished an important retest of the multiyear resistance/now-support area, and from this perspective it should at least be able to bounce to a lower high from here.
On the daily chart, we see the August flush-out better and note that the red 200-day moving average has acted as a good line of reference in 2015. After breaking below this moving average in March, it was then retested and promptly rejected in June and INTC stock has traded below there ever since. The moving average, however, also acts as a magnet and may again do so in the near term.
Note that the V-shaped reversal in August also led the stock to form a higher low last week, while many broader U.S. equity indices revisited their August lows.
Intel has since also overcome both diagonal and horizontal resistance lines, all of which favors the path of least resistance for the stock to be higher through at least a multi-week lens.
Active investors could look to buy INTC stock at current levels for an initial price target near $32 and if it were to hold above there a second price target closer to $34-$35 could come into play. Last week’s support near $27.90 could be used as a first stop-loss area.
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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.
