Dow component Intel Corporation (INTC) is trading at a six-month high on Friday morning after beating third quarter consensus estimates and raising full-year guidance. The bullish news triggered a flurry of pre-market upgrades and positive commentary, with Cowen, Wedbush Securities, Raymond James, and Northland Capital all noting increased momentum and a brighter-than-expected outlook through 2020.
The broad market breathed a sigh of relief after the news, with the chip giant unaffected by the escalating trade war. Data-centric businesses shined during the quarter, posting record revenues, while personal computer revenues fell 5% year over year, continuing that segment's decline. The company now expects to earn $4.60 per share in fiscal year 2019 vs. prior guidance of $4.38, with $71 billion in revenues vs. the previous forecast of $69.5 billion.
INTC Long-Term Chart (1990 – 2019)
A modest uptrend accelerated in 1991, posting steady upside into the 1993 high at a split-adjusted $4.64. It finally cleared resistance two years later, entering a more vertical advance that posted multiple rally waves into August 2000's all-time high at $75.63. Bears took control when the internet bubble burst, generating a steep downtrend that continued into the October 2002 low at $12.95.
The stock bounced strongly after the 80% haircut, but the recovery wave stalled in the mid-$30s in November 2003, marking a high that wasn't mounted for the next 11 years. It booked modest losses during the mid-decade bull market, settling in the upper $20s at the end of 2007, and turned sharply lower during the 2008 economic collapse. Bearish action undercut the 2002 low by 90 cents in March 2009, finally ending the nine-year downtrend.
A shallow uptick mounted the 2003 high in 2014, but buying interest evaporated quickly, yielding choppy sideways action, ahead of a 2017 breakout that added more than 20 points into the June 2018 high at $57.60. The stock struggled for the rest of the year, dropping to an eight-month low in the $40s in November. A successful December retest completed a double bottom reversal, setting the stage for a strong 2019 recovery wave.
The uptick reversed two points above the 2018 high in April, giving way to a decline that reached the 2018 low in May. The stock has now posted two higher lows off that level and is trading about four points below the 2019 peak after Friday's opening bell. Meanwhile, the monthly stochastics oscillator is engaged in a buy cycle that hasn't reached the overbought level, raising the odds that the current uptick will reach range resistance in coming weeks.
INTC Short-Term Chart (2017 – 2019)
The uptrend into 2018 stalled after the stock crossed the .618 Fibonacci retracement of the nine-year downtrend, while price action into 2019 has crisscrossed that harmonic level multiple times. A choppy rectangular pattern has emerged in this chaos, setting the stage for another test at range resistance in the upper $50s. However, the process could take longer than most folks expect, due to three adverse technical factors.
First, the rally has reentered the big April sell gap, a price zone that contains many trapped shareholders who will be looking to get out even. Second, the on-balance volume (OBV) accumulation-distribution indicator is well below 2018 and 2019 peaks, indicating that many long-term shareholders have pulled up stakes and headed back to the sidelines. It will take time to replace this lost sponsorship, making a rapid advance to new highs less likely.
Finally, the .786 Fibonacci retracement of the nine-year downtrend lies just above the 2018 high at $62, or less than three points above the breakout level. In turn, this predicts that a rally may stall quickly after mounting range resistance, potentially marking a final top in the recovery wave that started in 2009. More importantly, that upside target isn't sufficient reward for the risk taken if buying the stock at the current level or following a breakout.
The Bottom Line
Intel stock has rallied to a six-month high after a strong quarter and bullish guidance, and it could test 16-month range resistance in the coming weeks.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.