Intel (NASDAQ: INTC) appeared on my bullish scan the other evening and that caused me to look at both the daily and weekly charts for the semiconductor giant.
On the daily chart, the first thing that jumped out at me was the number of times the stock has gapped either higher or lower over the last nine months.
I took the liberty of highlighting the gaps last June, last July, and the one that happened last month. There was even a smaller one last October that I didn’t feel warranted a call-out. So what is the significance of gaps in a chart?
Many technical analysts believe that gaps in a chart have to be filled before the prevailing trend can be resumed. In the case of Intel, that would mean that the stock would have to go back up to the $35.50 area to fill the gap lower the stock experienced in January. If that is the case, which prevailing trend is to be resumed?
In a look at the daily chart we see that the stock has experienced a string of lower highs starting in early December. It made it to just shy of $38 in early December, but only got back as high as $37.74 in late January. In mid-January, the stock rallied back up to $37.49 before falling back a little and then rallying back to $37.03 a week later.
This pattern suggests that Intel stock is on its way down, after it fills the gap of course.
After seeing all of this on the daily chart, I pulled up the weekly chart. Here, two items jumped out at me that run counter to what the daily chart patterns are suggesting. INTC hit a low of $29.46 during the overall market pullback last fall. Should the stock fall to this level, the area should provide the first layer of support, but that over 11% below the current trading level.
The second element that got my attention was the upwardly sloped trendline that connects the lows from 2013 and 2014. The stock hasn’t been near this trendline in the last year, but should the price remain higher for a few more weeks, the trendline will reach the $29.46 level and that would give the stock two different forms of support in the same area. It would probably mean that the weekly oscillators will have reached oversold levels or at least the lowest levels they have seen in the last few years.
I would look at INTC as two possible trading opportunities. The short-term outlook is a bearish one from my perspective, but I would wait until it is out of oversold territory on the daily chart or fills the most recent gap. Should the stock fall all the way down to the $29.50 area, I would look at it as an opportunity to buy the stock for an intermediate-term trade (three to six months).
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