Dow component Intel Corporation (INTC) has gained more than 30% since posting a multi-month low in August 2019, roughly the same percentage as market-leading semiconductor funds and indices, but the chip giant's long-term performance is far less bullish. This bearish divergence adds risk ahead of next week's fourth quarter earnings report, raising the odds for a reversal that may affect the group's leadership.

The PHLX Semiconductor Index (SOX) has posted an astounding 79% return since the December 2018 low, highlighting a historic breakout above 20-year resistance. Intel has gained just 40% during this period while flip-flopping through weeks of alternating buying and selling pressure. More importantly, it's still trading more than 16 points below the 2000 internet bubble peak, one of the few big tech names failing to mount that hurdle during the 10-year bull market.

In addition, the stock still hasn't cleared resistance at the June 2018 high, despite two nominally higher highs in the past 19 months. Equal-sized rallies and sell-offs during the period have carved a jagged appearance that is more likely to attract swing traders than the trend-following crowd. Given the two-sided pattern, it makes sense that accumulation-distribution indicators show inconsistent buying interest since the fourth quarter of 2017.

INTC Long-Term Chart (1990 – 2020)

Chart showing the share price performance of Intel Corporation (INTC)
TradingView.com

A historic uptrend gathered force throughout the 1990s, lifting the stock to an all-time high at $75.81 in August 2000. It got crushed when the internet bubble burst, dropping in multiple waves that relinquished 83% of the stock's value into the October 2002 low. A modest bounce into the fourth quarter of 2003 stalled below the .382 Fibonacci retracement level in the mid-$30s, marking a resistance level that took 14 years to overcome.

The stock drifted sideways into the end of 2007 and sold off, undercutting the 2002 low by 90 cents in March 2009. It bounced strongly into the new decade, gaining ground until it reversed at 2005 resistance in the upper $20s in 2012. A 2014 breakout made limited progress into December 2014 when it stalled about three points above the 2003 high. That level denied further upside for nearly three years, finally yielding another breakout in October 2017. This rally wave surged into the June 2018 high and eased into a trading range that remains in force.

The monthly stochastics oscillator entered a long-term buy cycle in July 2019 and crossed into the overbought zone in the fourth quarter. This relative strength tool has now stretched into an extreme level that has generated multiple bearish crossovers in the past 25 years (red line). However, the indicator doesn't emit precise signals for intermediate reversals, so it's just a red flag at this point.

INTC Short-Term Outlook

A Fibonacci grid stretched across the eight-year downtrend that ended in 2009 illustrates how the subsequent uptrend has stair-stepped from level to level, culminating with the latest trading range, which is sitting in the .50 retracement. Note how price action is now "stretching" toward the .786 retracement level, which has a well-earned reputation for ending long-term recovery wave. This placement tells sidelined investors to keep their power dry until the stock lifts into the mid-$60s.

The ebb and flow of Intel price action hasn't changed much in the past decade, with a rally spurt followed by several years of sideways consolidation. These trading ranges have averaged between two and three years, while the current pattern has now entered its 19th month, indicating that it may be premature to expect a breakout. This is especially true given the stock's failure to break out despite broad-based sector tailwinds in recent months.

The Bottom Line

Intel stock has failed to break out during the bull market's latest trend advance, signaling hidden weakness that could come into play after next week's earnings release.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.