Why Intel's Stock Is Poised To Surge

Nov. 29, 2018 6:17 PM ETIntel Corporation (INTC)36 Comments

Summary

  • Intel's stock has been stuck below $49.
  • Options trade suggests the stock rises.
  • The stock's valuation is the cheapest in years.
  • This idea was discussed in more depth with members of my private investing community, Reading The Markets. Start your free trial today »

Intel Corp.'s (NASDAQ:INTC) stock may be ready for a technical breakout. It could result in the stock surging 10% or more, should the stock rise above $49. Should that happen, it would trigger a breakout.

Options traders are also betting the stock rises 11% by the middle of February. We talked about this in our premium room on November 28. One reason investors may be bullish on the stock is its cheap valuation versus its historical comparables and its peers.

Technical Breakout Nears

The stock is currently trading below a wall of technical resistance at $49.00. The stock has attempted to rise above that price several times and has failed since the beginning of November. Should the stock finally rise above that level of resistance, the shares may go on to advance to the next level of significant resistance around $52.50 from its current price of $48.

Additionally, there is a gap in the chart which was created in the middle of August. The stock may also be attempting to "fill the gap," rising back to roughly $52.50. Further, there is also technical reversal pattern which has formed in the chart called a falling wedge. It too would suggest the stock may rise.

The relative strength index is also firmly trending higher and indicates that bullish momentum is moving into the stock.

Intel technical chart

Bullish Options Bets

The $52.5 call options for expiration on February 15 have seen an increasing level of activity over the past couple of days. Open interest levels for those calls have risen to 14,400 open contracts. With the calls trading for $1 per contract, to earn a profit, a buyer would need the stock to increase to $53.5 by expiration, 11% higher than the current stock price.

Cheap Valuation

There are plenty of fundamental reasons why Intel

ChartFundamental Chart data by YCharts

ChartINTC EPS Estimates for Next Fiscal Year data by YCharts

ChartINTC Gross Profit Margin (Quarterly) data by YCharts

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This article was written by

Mott Capital Management profile picture
32.06K Followers
Designed for investors looking for stock ideas and broader market trends.

I am Michael Kramer, the founder of Mott Capital Management and creator of Reading The Markets, an SA Marketplace service. I focus on long-only macro themes and trends, look for long-term thematic growth investments, and use options data to find unusual activity.

I use my over 25 years of experience as a buy-side trader, analyst, and portfolio manager, to explain the twists and turns of the stock market and where it may be heading next. Additionally, I use data from top vendors to formulate my analysis, including sell-side analyst estimates and research, newsfeeds, in-depth options data, and gamma levels. 

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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