Intel in the news

At Tricio we like to look at charts in order to gauge market sentiment and investor action. We have talked about the Intel chart on its own and as part of the broader semi-conductor index (SOX) in previous blogs and other Tricio publications and podcasts.

The decision by the current US administration to take a 10% share in the company was seen by us as not being how the US government usually works. The market seemed to take this in stride though. The decision by NVIDIA to buy $5 bn worth of INTC shares (pending regulatory approval) this week is another thing altogether. The government announcement about their 10% share shifted the share price a little bit higher, the NVIDIA announcement really goosed the share price though, as the biggest one-day rally since the 1980’s was seen.

How beleaguered is the company? The chart below from Macrotrends sums up what most fund managers are probably thinking. Slumping earnings, slumping share price, negative/zero PE ratio. These facts don’t inspire funds to overweight the share, and probably has led to many of them trimming their holdings as much as possible over the last few years. There are many other companies in this sector doing a lot better.

The share price chart (weekly, below) and relative line to the SOX index (red) shows that the company has underperformed their peers for many years. But, if you put on the rose tinted glasses and cast your mind back to the $150 mio bailout of Apple by Microsoft in 1997, and who knows, maybe good things can happen here. Which is a good reason to look at the chart to see what may happen, and what it might mean.

First of all, the share price is above the 13 and 50-week moving averages and the averages are crossing higher, which is supportive. The share price has also cleared the three horizontal resistance lines now, which is positive. Big reversal fans need to see the downwards sloping blue line near $40 give way next to really suggest that the bear trend is breaking. We have had $34 reversal targets for the share which are still valid.

The key now though is to watch dips. If sentiment is reversing, then dips should draw out buyers. Lower prices drawing out demand is what creates chart support levels. Buyers (demand) pushing prices higher is what makes bull trends.

So far, we have a bump higher on news. As the news gets digested, investors will either take the view that it was a nice bump higher, but nothing material has really changed. This could lead the share to drop back in the range seen over the last few quarters.

If investors take the view that something has changed though, then look for the dips to remain limited with ideally the green and red lines holding up, and for a shift above the falling blue line to follow. Dream of $50 to $69+ again?

Gerry Celaya

Chief Strategist