Intel: Banks Come Late to the Party

By Guy Adami

Tuesday morning Bank of America/Merrill Lynch upgraded Intel (INTC) to a "buy" rating, saying the chipmaker is starting to see a definite improvement in demand, which will drive margins higher in the semiconductor industry in general.

Sounds kind of like the "green shoots" idea. Maybe the folks at Bank of America missed this, but the market has already been pricing in exactly this kind of improvement for the last three months.

We're now in a period of questioning those assumptions, and everyone will have an eye on earnings to see just how real this recovery is. I won't opine on that, but it's clear that the optimism is facing a big reality check as I write these words.

Don't get me wrong: I love INTC and own it personally. I'm just saying it's not worth chasing at these levels.

The INTC bulls already got a reality check last Wednesday, when the stock rallied to a nine-month high above $17 in heavy volume. But who wants to chase any kind of economically sensitive name higher when the rest of the market is questioning its bullish assumptions?

Last Wednesday looks like a near-term top on INTC to me. The stock has already pulled back from its high today of $16.93 and is showing some signs of weakness. I think we could see it trade down to $15.75 and expect that it will take at least a little while to break back through $17.

When the market stabilizes and rebounds, INTC is a name you want to own. But that's in the future, and it's going to get cheaper first.

Disclosure: I own shares of Intel.

(A version of this post appeared on Advantage Point earlier today. Chart courtesy of tradeMONSTER.)

Comments

[Prudent Man...:]

I own the stock with a low cost basis. It is highly priced here on a very cloudy outlook for the international economy. I keep writing higher calls and they always end up a fraction away from my strike on expiration.

Shows what can happen in irrational markets. But, if they keep giving me the money I'll keep taking it. With only 30% of my investable funds in equities I can exercise my patience because as we keep in a deflation mode my nominal cash becomes worth more. Shouldn't government employees be getting pay cuts?

Jul 07 08:59 PM