Intel Corporation has been one of the best performing Dow stocks of the past one month. Shares are up a big 11 percent, compared to a 6 percent gain in the DJIA during the same period.
However, one noted technical analyst and trader reckons Intel has run into significant resistance, and is ripe for a major correction.
Is the Intel Corporation Rally Over?
“I think Intel is overbought and due for a sell off,” Andrew Keene of AlphaShark Trading told CNBC. “We’ve had this nice run off the low, but we are finding sellers here at $32.”
A look at the daily price chart of Intel Corporation shows that $32 coincides with multiple price pivots made in the past. The last time it went there was in January, when sellers came in droves, and hammered the stock lower. “I think that is going to serve as resistance,” Keene added.
Furthermore, the longer term Intel chart shows that shares are kissing the 100 week moving average, which Keene expects to be another key price ceiling.
To play this projected dip in the stock, Keene has bought the April 32/31 put spread at 25 cents apiece. The put spread is a bearish options strategy where a trader buys a put and then sells a lower strike price put of the same expiry to offset the cost of initiating the trade. The goal, in this case, is for the underlying stock to drop to the short strike, or $31 by April. That’s close to 3 percent lower than Intel’s Wednesday closing price.
“If Intel can end up at $31 or lower, I can end up with 300 percent returns within 3 weeks,” Keene said.
Wall Street Still Bullish on Intel Corporation
Despite the bleak outlook from technical charts, a majority on Wall Street expect Intel Corporation shares to continue outperforming the broader market. The average rating of the 44 analysts covering the stock is “overweight,” with a 12 month target price of $36.07 a share, according to a Thomson Reuters poll.
Earlier this week, Teresa Rivas wrote in Barron’s that given the strength of its data center business, Intel shares could rise a further 25 percent. Another top market voice, John Pitzer of Credit Suisse, recently reiterated his “buy” rating on the stock with a $40 price target, amid the growing supplies to Apple Inc’s iPhone.
Shares of Intel Corporation ended yesterday at $32, down 1 percent for the session. The stock has a 52 week high of $35.59, and a 52 week low of $24.87.