Intel Corporation (INTC) has lifted shareholder spirits this autumn, breaking out to a multi-year high after struggling with resistance in the upper $30s for more than two years. However, the chip giant needs to report solid third quarter metrics after Thursday's close or risk a volatile slide that brings long-term bears out of hibernation. That could be a tough task, given income compression generated by the ongoing exodus out of personal computers and into mobile devices.

However, Intel's transition out of a historically slow-moving corporate culture is finally paying off, building profits for initiatives that include the futuristic Internet of Things. This division's growth track leveled off in 2016 but is gaining traction once again, adding more than $700 million in revenues each quarter. While that does not come close to replacing lost PC income, it is headed in the right direction. (See also: Intel Stock Awakens After Long Slumber.)

INTC Long-Term Chart (1993 – 2017)

 

A seven-year uptrend ended at a split-adjusted $4.64 in the fourth quarter of 1993, giving way to a broad consolidation pattern that generated a fresh breakout in 1995. The stock stair-stepped higher into the new millennium, powered by its status as one of the legendary four horsemen, the moniker for a tech stock quartet recommended by that era's financial advisors as candidates to buy and hold for life.  

The stock carved a six-month double top pattern in the mid-$70s and broke down in September 2000, entering a severe downtrend that continued into the October 2002 low at $12.95. A bounce into 2003 fell short, carving a lower high in the mid-$30s that marked resistance for the next 13 years, ahead of weak action that continued into March 2009 when it bottomed out just below the 2002 low. (For more, see: Is Intel in Trouble if Apple Makes Its Own Chips?)

A steady recovery reached 2003 resistance in December 2014, giving way to a decline that found support in the mid-$20s. Those horizontal boundaries held through multiple tests, carving a cup and handle pattern across long-term resistance. The stock finally broke out in October 2017, lifting to a 16-year high in the low $40s while also mounting the .382 Fibonacci retracement of the nine-year downtrend. In turn, this should open the door to the .618 retracement in the low $50s.

INTC Short-Term Chart (2014 – 2017)

 

The climactic low posted during the August 2015 mini flash crash set a corrective floor, ahead of a steady recovery wave that reached the 2014 high in October 2016. A reversal into the third quarter of 2017 generated a series of lower highs, carving a trendline that broke to the upside in September. Momentum and buying volume escalated rapidly following that technical event, with the price surging above long-term resistance on Oct. 2.  (See also: How Intel's Stock May Catch Up to AMD, NVIDIA.)

On-balance volume (OBV) peaked in the fourth quarter of 2014 and entered an aggressive distribution wave that finally ended in early 2016. Accumulation has closely tracked price action since that time, lifting to a new high that signals loyal institutional sponsorship. This strong tailwind should ease the impact of bad news in coming months while supporting trade and investment entries at lower levels.

The stock carved an Elliott five-wave rally pattern off the August low and is now technically overbought, raising the odds for a consolidation or pullback to shake out excessive bullishness. This price structure favors a sell-the-news reaction to earnings, generating a decline that could test breakout support near $38. That pullback may extend to trendline support at $36, with both levels offering low-risk buying opportunities for long-term positions. (To learn more, see: How to Trade Breakouts Using Elliott Wave Theory.)

The Bottom Line

Intel reports third quarter earnings after Thursday's close, with major risk for a bearish reaction because the stock has gone straight up since August and is now technically overbought. That decline could test a multi-year breakout in the upper $30s, offering a historic buying opportunity. (For additional reading, check out: Intel Stock Hits New Highs, Overbought Territory.)

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

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