Intel Stock Experiences Technical 'Reversion to the Mean' Amid Market Fluctuations

Intel Corporation (INTC), a leading force in the semiconductor industry, has impressively surpassed earnings per share (EPS) expectations for 24 consecutive quarters. However, the stock currently remains in bearish territory, trading approximately 24.4% below its 52-week high of $69.29 reached on January 24. Conversely, it also shows resilience, standing about 20% above its March 16 low of $43.63, indicating bullish momentum from that point.

As of last week’s close, Intel shares were priced at $52.37, marking a 12.5% decline year-to-date and sitting beneath a critical resistance zone between $57.17 and $58.02. Valued with a price-to-earnings (P/E) ratio of 11.26 and offering a dividend yield of 2.28%, according to Macrotrends, Intel presents a fairly attractive valuation.

Intel specializes in manufacturing advanced computer chips that power integrated digital platforms across computing and communications sectors. The company holds a significant position within major market indices such as the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite, underscoring its role as a key market benchmark. Despite its longstanding presence, Intel’s stock price remains below its peak during the tech bubble, which hit $75.81 in August 2000.

Strategically, Intel focuses on data center services encompassing servers, networking, and storage solutions, while also advancing cloud computing technologies. Additionally, the company develops chips for emerging fields like autonomous vehicles, artificial intelligence, and the Internet of Things (IoT).

Technical Analysis – Daily Chart Insights

The daily chart highlights a "golden cross" formation starting October 25, when the 50-day simple moving average (SMA) surpassed the 200-day SMA, signaling potential upward momentum. This bullish indicator propelled the stock to its 52-week high of $69.29 on January 24.

At that peak, Intel’s price was well above annual, semiannual, and quarterly pivot points set at $57.17, $57.37, and $58.02 respectively. However, on February 24, the stock sharply declined below the 50-day SMA, testing these pivotal resistance levels between February 27 and March 5. This cluster of pivot points acted as significant support and resistance zones.

Following the breakdown of this support wall, the 200-day SMA became a critical level to watch. On March 9, Intel’s stock fell beneath the 200-day SMA, ending the golden cross pattern and signaling a sell-on-strength approach near this moving average.

The stock reached a low of $43.63 on March 16 before beginning a recovery phase. It surpassed the weekly pivot at $46.85 on Monday and retested the 200-day SMA as a sell zone later in the week. Currently, Intel trades below the previously mentioned resistance cluster.

Technical Analysis – Weekly Chart Overview

The weekly chart presents a bearish outlook, with Intel’s price positioned below its five-week modified moving average (MMA) of $55.82. Nevertheless, the stock remains above its 200-week SMA at $45.25, a level recently tested as a potential buying opportunity, reflecting a classic 'reversion to the mean' phenomenon.

The 12 x 3 x 3 weekly slow stochastic oscillator declined to 33.21 last week from 36.40 on March 20. At the start of the year, this indicator was above 90.00, indicating an "inflating parabolic bubble"—a pattern often followed by significant corrections.

Investment Strategy Recommendations

Consider acquiring Intel shares during price weaknesses approaching the 200-week SMA near $45.35. Conversely, it is advisable to reduce holdings when the stock strengthens towards the annual, semiannual, and quarterly resistance points at $57.17, $57.37, and $58.02 respectively.

Utilizing Value and Risk Levels

These proprietary analytics are derived from closing prices as of December 31, 2019, and encompass quarterly, semiannual, and annual pivot levels. Monthly levels are updated based on the previous month’s closing prices, while weekly and quarterly levels refresh at the end of each respective period. Semiannual and annual levels provide ongoing reference points throughout the year.

The underlying premise is that nine years of price volatility sufficiently encapsulate all potential bullish and bearish factors affecting the stock. Investors can leverage this by purchasing shares near value levels and trimming positions near risky thresholds. Pivot points act as magnetic zones with a high likelihood of price retesting within their timeframe.

Interpreting the 12 x 3 x 3 Weekly Slow Stochastic

This momentum indicator was chosen after extensive backtesting post-1987 market crash to minimize false signals. It evaluates the stock’s highs, lows, and closes over the past 12 weeks, generating fast and slow readings, with the slow stochastic proving most reliable.

Values range from 0 to 100, where readings above 80 suggest overbought conditions, and below 20 indicate oversold. A reading exceeding 90 signals an "inflating parabolic bubble," often followed by a 10% to 20% decline over three to five months. Conversely, readings below 10 are considered "too cheap to ignore," typically preceding a 10% to 20% price increase in the same timeframe.

Disclosure: The author holds no positions in any mentioned stocks and does not intend to initiate any within the next 72 hours.

Have a news tip for Investopedia? Contact us at tips@investopedia.com.

Explore useful articles in Company News as of 03-04-2020. The article titled " Intel Stock Experiences Technical 'Reversion to the Mean' Amid Market Fluctuations " offers in-depth analysis and practical advice in the Company News field. Each article is carefully crafted by experts to provide maximum value to readers.

The " Intel Stock Experiences Technical 'Reversion to the Mean' Amid Market Fluctuations " article expands your knowledge in Company News, keeps you informed about the latest developments, and helps you make well-informed decisions. Each article is based on unique content, ensuring originality and quality.