Dow component Intel Corporation (INTC) has lifted within two points of the 2018 bull market high in the upper $50s, setting the stage for a key test at resistance, with a breakout signaling the next leg of the strong uptrend that started after the stock cleared 17-year resistance in 2017. The buying spike would also raise the odds for a strongly bullish impulse that finally reaches 2000's all-time high at $75.81.
The PHLX Semiconductor Index (SOX) reversed at the 2000 high near 1,400 in 2018, entering a steep correction that finally ended at a 16-month low in December. The index has gone straight up since that time and is now trading a few points above the 2018 high in a potential breakout. However, multi-decade resistance rarely gives up without a protracted fight, and the index carved just a single support level during the 38% ascent, raising the odds for a bull trap.
Intel reports earnings on April 25, with analysts expecting earnings per share (EPS) of $0.87 on $16.03 billion in first quarter revenues. The chip giant sold off after cutting first quarter guidance in January, and those depressed numbers remain in place, raising the odds for an earnings surprise and strong buy-the-news reaction. Even so, this stock is joined at the hip with the SOX index, which will be the guiding directional force regardless of quarterly results.
INTC Long-Term Chart (1995 – 2019)
A 1995 breakout above a split-adjusted $4.75 caught fire, posting impressive gains while splitting twice into the 1997 high at $25.50. It cleared that resistance level one year later and took off in a final buying impulse that stalled in the lower $70s in March 2000. A mid-summer breakout failed after posting an all-time high at $75.81, carving the final stage of a double top pattern that broke to the downside in September.
The bottom dropped out after the internet bubble burst, dumping the stock more than 80% into the March 2002 bear market low at $12.95. A 13-month bounce into the mid-$30s marked the highest high for the next 11 years, ahead of range-bound action with support in the mid-teens. The stock broke range support during the 2008 economic collapse, reaching a 12-year low at $12.05 in March 2009.
That print ended the eight-year downtrend, ahead of a slow-motion uptick that completed a round trip into the 2003 high in 2014. The stock then eased into a cup and handle pattern with resistance at that level, breaking out in October 2017 and posting healthy gains into June 2018's 17-year high at $57.60. That surge filled the September 2000 gap between $50 and $55, while the decline into year end held range support in the lower $40s, setting the stage for a strong first quarter recovery.
Harmonic Resistance Still in Play
The 2018 reversal unfolded just below the .786 Fibonacci sell-off retracement level, which marks a common price zone for lower highs within topping patterns. As a result, a breakout into the mid-$60s would set off a buying signal because that action would clear the last harmonic resistance level before the stock completes a 100% retracement into the 2000 high. However, patience is required because the odds are now equally weighted between a breakout and a bull trap.
The monthly stochastics oscillator crossed into a buy cycle in November 2018 and just entered the overbought zone. This is bullish behavior because it may indicate a sustained uptrend, but skeptical market players will be watching closely for a bearish crossover, either before or right after a breakout into the $60s. It's also possible that the uptick will reverse after hitting the .786 retracement, marking a last chance to take profits before a steep decline.
The Bottom Line
Intel stock is testing the bull market high and could break out, but it needs to reach the mid-$60s to clear hidden resistance.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.