Trade a Bounce in Intel

“95 percent of the time when you go against that kind of hysteria, you are going to make money.” - Legendary Investor Jim Rogers, “Buying Value and Selling Hysteria” in Market Wizards: Interviews With Top Traders (1989)

The move in Intel (INTC) is overdone. The stock is now down 25% in the first 11 trading days of 2008 on huge volume:

Take a step back and think about what they said yesterday. They fell short of expectations - but they still made a lot of money: $2.3 billion in fact.

As of right now (3:20pm EST), today is the 3rd highest volume day in the last 5 years (Jan 18, 2006; July 14, 2004):

These charts and moves say “Panic”. Selling volume has been big since the start of the year. Shares are now about 17-18% below their 200 day moving average. Everybody is selling and very few are stepping in to buy.But there is value there. When you back out the $2.40 per share in net cash on Intel’s balance sheet it is trading for about 15 times its last 4 quarters' income.

This is the premiere semiconductor company in the world. Semiconductors are crucial components for computers and all sorts of electronics. Step in now and hold when nobody else wants to and when some good news surfaces and the panic subsides, buyers will return and you can sell it to them then.

Disclosure: Top Gun is long Intel (INTC) shares.

Comments

[Shameless Ko]

Amatueurs always trade on the LONG side, hoping to "trade a bounce". Your charts are shaped in a way to minimize the risk of the dowsize, which I see at $19 immediate, and as low as $17.5.

If you really paid attention to the INTC quarterly conference call, you will see that this "earnings miss" was obviously "engineered"... lack of better words). Pay special attention to Jim Covello's comments and questions. The gross margins should be higher for the whole year, and Q1 projections should have been higher along with higher margins. Stacy was new CFO, first timer on the conference call, and he was dumb as a F*K.(again, listen to the conference call and only pay attention to Jim Covello from Goldman Sachs.

Now, this begs the question why it's manipulated like it. I don't dare to say what I think is going on behind the scenes. Before you trade that bounce, be careful of what's below. I don't see anything that can prevent it going to $19 in a month or $17.5 in 6 months.

[Shameless Ko]

Spell check please. I typed "Amateurs" and "downside" wrong...oh well, I am tired. Just be careful. Don't catch a knife when you think it could bounce.

[kowalski]

"Everybody is selling and very few are stepping in to buy."

Hmmm... I wonder how 300 million shares could have been sold today, if there had not been buyers too ,-)))

[Shameless Ko]

$19.00 coming ...possibly as soon as next week.

[Shameless Ko]

Damn, I nailed it. To the penny. $19.00. Oh well. If you want to buy INTC, you should buy 1/4 here, 1/4 at $17.50, then 1/4 every dollar down. So the worst case is that Intel does to $15.50, and you are fully loaded. Dip into margins if it does below that.

[Shameless Ko]

BTW, Greg, how's your bounce trade going? INTC is likely to open below $18.00 on Monday. $17.50 next week is very possible. Given the European trading information, $17.50 should be the first 1/4 buy. $15.00 should be the second 1/4. Then 1/4 every $1.00 down.

[Greg Feirman]

Shameless. It did bounce like I thought it would. Truth is I didn't make any money on this trade though - bought at $20.00 on Wed 1/16 and sold it $19.80 on Mon 1/28. But there were opportunities to make money here. I just wasn't ready to trade first thing Friday 1/25 when it surged through $21 at the open. It's still over $21 at the close today (Thu 1/31). But, like I said, it was just a trade for me and I don't want to own Intel right here so I got out.