(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Intel Corp. (INTC) shares are nearing a critical inflection point, one that could potentially send shares of the stock soaring by 30% to about $60. A rise above $48 could clear that path and set up the massive gains, sending shares to a price not seen since September of 2000. It would surely be an enormous gain, but then consider that Intel has underperformed the broader iShares PHLX Semiconductor ETF (SOXX) by nearly 15 percentage points in 2017.
The First Breakout
Intel shares broke out back in October when shares of the stock rose above $38, helping to push shares higher by nearly 25% to roughly $47. Shares of the stock have retraced some in the weeks that followed, but the stock has started rising again, and a rise over and above $48 would trigger another breakout. (For more, see also: Intel's Stock Can Rise Over 20%: BMO Capital.)
The breakout at $38 came on a surge in volume, and when volume started to decline shares of the stock dropped as well. We are now beginning to see a rise in volume and should that continue it could help lead to shares of the stock testing resistance at $48.
The chart above goes back to September of 2000, and shows the giant gap created from around $60.50 to $48 during the technology meltdown. Should Intel break resistance at $48, it gives the stock a clear run at filling the gap at $60.50, and the opportunity to refill a gap that is over 17 years old.
Options traders are betting shares of Intel may be getting ready for shares to break out as well, with nearly 43,000 calls of open interest at the $47 strike price, set to expire on January 19. There is another 20,000 contracts of open interest at the $48 strike price. Put contracts are less active with the $45 strike price puts having the most substantial open interest with only 25,000 contracts. (For more, see also: Inside Intel: A Look at the Mega Chipmaker.)
The call options are suggesting that the price of the stock would need to rise to roughly $47.85 just for the calls to break even, based on the $47 strike price contract of about 85 cents. It would indicate that perhaps some are betting shares of Intel could rise above $47.85 over the next month.
Intel shares could be on the cusp of a significant breakout in the not too distant future, and that could send shares soaring higher to levels not seen in nearly two decades.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.