Intel Stock: Back Below 2018 Lows – But Still Not A Buy (NASDAQ:INTC)

Intel company logo on the roof.

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Price Action Thesis

This is a detailed price action analysis on Intel (NASDAQ:INTC) stock following our post-earnings update in May. There were significant developments in its price action over the past month. Even though we noted that INTC stock was at a near-term bottom, there was no bear trap price action undergirding its weak momentum. Previously, our thesis was based on our assumptions that its near-term headwinds had been priced in.

However, as we parsed its price action developments over the past month, we realized that perhaps we were too early in trying to catch its recovery in momentum. As a result, INTC stock also fell further and is testing its critical support held since 2018.

However, there still isn’t any bear trap price action that could help reverse its momentum. Furthermore, a series of bull traps remain in place to disrupt its potential recovery, as INTC stock moved into negative flow (decisive bearish momentum).

As a result, we believe it’s appropriate to revise our rating from Buy to Hold until we observe a clear reversal price action signal.

The Double Top Bull Traps Proved Too Much

INTC price chart (monthly)

INTC price chart (monthly) (TradingView)

The double top bull traps that drew in buyers were highly effective, as seen above. The second double top was the one that broke the previous bear traps that held the last line of defense.

Notably, INTC stock formed its second double top a few months after the announcement of Pat Gelsinger’s appointment as Intel CEO in January 2021. That double top broke Intel’s multi-year bullish momentum, which took several months to distribute. When we ignored double top bull traps in the past, our mistakes have often returned to haunt us. Previously, we have also not paid sufficient attention to INTC’s double tops. Therefore, we are not going to repeat our past faux pas.

Given INTC stock’s bearish momentum, investors need to watch for a double bottom bear trap to indicate a high probability reversal. Unfortunately, we have not seen one yet.

INTC price chart (weekly)

INTC price chart (weekly) (TradingView)

Zooming into INTC stock’s weekly chart, we can corral the series of bull traps that followed its double top bull trap. Those were significant price action signals that sent INTC stock into negative flow, as seen above.

Notably, we have not noticed any bear trap price action that could help sustain its near-term bottom. Last week’s price action had sent the stock down further to its intermediate support. Therefore, INTC stock is now stranded in “no man’s land.” Its near-term bottom looks tenuous without a bear trap coupled with a dominant bearish bias.

However, as the stock is still testing its multi-year support zone, we think investors should continue to accord higher significance to the dominant trend until a validated and material price action reversal signal is observed.

Is INTC Stock A Buy, Sell, Or Hold?

INTC valuation metrics

INTC valuation metrics (TIKR)

INTC stock has often been regarded as cheap compared to its semi peers. As a result, some investors have chosen to take the leap of faith in INTC stock, given the growth premium seen in its high-flying peers.

INTC YTD performance %

INTC YTD performance % (Koyfin)

Some investors have also alluded to INTC’s YTD outperformance against the Invesco QQQ ETF (QQQ) and the iShares Semiconductor ETF (SOXX), as seen above.

We believe it’s arguable that INTC’s more reasonable valuation has helped it avoid the steeper sell-off seen in some other semi stocks. However, that doesn’t necessarily imply that investors should add INTC stock based on its relative valuation.

We also urge investors to let the current price action continue playing out and monitor for a bear trap price action that could help stage a potential reversal.

Given the uncertainty in INTC stock’s price action, we revise our rating from Buy to Hold. We will reassess our rating if we observe a significant development in its price action structure moving ahead.

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