Dow component Intel Corporation (INTC) reports earnings after Thursday's closing bell, with Wall Street analysts expecting earnings per share (EPS) of $1.11 on second quarter 2020 revenue of $18.55 billion. The stock ran in place after the chip giant beat first quarter 2020 estimates and guided second quarter EPS below consensus in April, citing headwinds as a result of the COVID-19 pandemic. The company chose not to provide fiscal year 2020 guidance at that time.
- Intel stock has attracted little buying interest since March, despite higher prices.
- The stock hasn't completed a round trip into the 2000 "bubble" high, unlike its high-tech peers.
- Wall Street is growing increasingly bearish on the outlook for Intel.
Goldman Sachs downgraded Intel stock to "Sell" just two weeks ago, lowering its price target to $54. The firm joined three other investment houses with the lowest possible rating, adding to a broad-based "Hold" consensus, based on 8 "Buy" and 11 "Hold" recommendations. Price targets range from a low of $45 to a Street-high $85, while the stock is now trading right on top of the $62 median target.
Intel stock reversed in June in the upper half of the first quarter trading range, about eight points below January's 20-year high at $69.29. It is still situated well below the 2000 internet bubble peak, failing to mount long-term resistance, unlike the majority of the big tech universe. Accumulation has failed to recover since the pandemic swoon, drifting close to March's multi-year low at the end of June. This doesn't bode well for higher prices after this evening's confessional.
Accumulation refers to a general increase in buying activity in an asset. In this case, the asset is said to be "under accumulation" or "being accumulated."
Intel Long-Term Chart (2000 – 2020)
The stock posted an all-time high at $75.81 in 2000 and broke down from a double top a few weeks later, dropping 82% into the October 2002 low at $12.95. It recouped about half those losses into the third quarter of 2003, marking the highest high for the next 11 years, ahead of a secondary decline that violated the prior low before bottoming out at 12-year low in March 2009. Bulls took control into the new decade, carving an uptick that reached 2003 resistance in 2014.
That price level marked an impenetrable barrier until a 2017 breakout posted three new highs into January 2020's 12-year high at $69.69. It carved a small double top pattern at that level and broke down in February, descending to a nine-month low in the mid-$40s. The subsequent uptick reversed after mounting the .786 Fibonacci selloff retracement level in June and settled near the 50- and 200 day exponential moving averages (EMAs) ahead of this week's confessional.
Intel Short-Term Chart (2018 – 2020)
The on-balance volume (OBV) accumulation-distribution indicator topped out in December 2017 and entered a distribution phase that ended at a 20-month low in May 2019. OBV reversed at the 2017 peak after the run-up into January and reversed once again after reaching the 2019 low. The June pullback nearly tagged the March low, highlighting greater-than expected selling pressure compared to other tech stocks. This doesn't bode well for a quick recovery to pre-pandemic levels.
The bounce reversed at the .786 retracement of the first quarter decline after the longer-term uptrend reversed just above the .786 retracement of the 2000 into 2009 downtrend. This symmetry needs to be watched closely because it suggests that the long-term uptrend is coming to an end, setting the stage for much lower prices in coming years. However, there's no way to gauge the duration of the topping process, so it's best to play short-term action until long-term signals emerge.
The Bottom Line
Intel stock has attracted little buying interest in the past four months, raising the odds that gravity will take control after this week's earnings report.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.