INTC - Should I stay or should I go?Eyes are on INTC today after the price pop following the announced change in management.
Personally I believe INTC (and other semi-conductor companies) have a justified place in any diversified portfolio. The business model in an increasingly digital world definitely has future growth potential but also incredible high barriers of entry. thus existing players should continue to excel. However the competition between existing players is high and thus puts pressure on margins and ultimately company results.
Over the past 3 trading days INTC has closed not only the gap lower of the October 2020 earnings, but also attempted to close the bigger gap of July the same year.
To me this raises the question; Does INTC have the potential to challenge its Feb 2020 highs or are we dropping back to more recent levels?
Current analyst consensus price is in the $51 area and would suggest that the stock overshot by about 10%. However, the newly announced management change plus hints towards stronger than expected earnings might give the stock more room to run. Thus I will not focus on the fundamentals until after earnings and look at the technical aspects for now.
What I like;
+ Closed October 2020 gap and aiming for July 2020 gap closure
+ Historical support in the $56/57 area which at the time of writing holds true
+ Series of consecutive "higher-highs" since December 22, peaking in two gaps higher in the past two days
+ Bullish breakout from a wedge that started forming since June 2020, however I do not believe that the height of the wedge is an indication for upside potential
What I don't like;
- Historically huge vol. at earnings with large jumps/gaps which makes risk control difficult
- The closing of the July 2020 faces strong resistance from profit taking or traders liquidating formerly loss making positions that were engaged prior to the gap lower
- RSI and MACD now in overbought territory
What I watch/expect;
Stock likely to consolidate at current levels, trading sideways pre-earnings
Clearance of July 2020 will provide further upside, failure will likely see a fallback into the $52 range
Earnings to trigger fundamentals update
Note; I have started to build OTC call positions (JAN-15) after the gap lower late last year with an average price of $52.50. My tendency is to exercise said options and own the stock rather then rolling the position with new strike/maturity. For now I will not operate any take-profit order but implement a fail safe Stop Loss at cost level.
***Everything above is my personal view and not to be considered investment advise. Risk management is key, never trade what you can't afford to loose***
