We wrote a story on Intel (INTC) on June 8 with a headline of " Intel is Putting Its Negative News Behind It," and concluded that, "I learned early in my career to pay attention when a stock or commodity did not go lower on bearish news -- this was a sign that the news was already discounted. This is how I view the price action on INTC today. Traders could wait a couple of days but I do not expect INTC to make a new low close for the move down. A recovery rally back towards $48 is possible within the long-term downtrend. This is just a short-term trade for nimble traders."
INTC is down sharply Friday on the heels of an earnings miss, light guidance and a number of fundamental downgrades by fundamental analysts. Let's go back to the drawing board.
In this daily bar chart of INTC, below, we can see that prices did stage a recovery rally, but it was weaker than anticipated. Prices have made a new low for the move down but are now trading off their worst levels. Has the bad news on INTC been quickly discounted?
If INTC can continue to recover into Friday's close, we find this to be another example of how investors are forward-looking instead of backward looking. Prices have made a new low, but for now the indicators have not confirmed the move. We should see a number of bullish divergences next week.
In this weekly Japanese candlestick chart of INTC, below, we do not yet have this week's candle pattern plotted, but the chart was turning more positive before today's weakness. The weekly OBV line has turned higher and the MACD oscillator is crossing to a cover-shorts, buy signal.
In this daily Point and Figure chart of INTC, below, we can see a potential downside price target in the $30 area, but we need a trade at $35 to refresh the downtrend. Close.
Bottom line strategy: The broad market environment has strengthened, so I am more willing to give some stocks the benefit of the next move being to the upside. For now I would give the benefit to INTC, but weakness below $35 turns the charts bearish.
