I want to continue with the Semiconductor theme in this post and consider the slower timeframe charts for Intel, a company that had its IPO back in 1971 and could be considered a ‘granddaddy’ of the computer industry. One reason for focusing on Intel is although it did not benefit from strong retail inflows at the beginning of the year (unlike Nvidia and AMD), the stock did rally a little before stalling at the volume point of control in the $30 region. This level has subsequently become a strong region of price resistance as well, as we can see on the daily chart. The poor earning report at the end of January resulted in an initial gap down after hours but recovered strongly the following day on very high volume, which was enough to propel Intel over the volume point of control to touch a high of $31. Since then, the stock has reversed lower, is trading sideways, and is just about holding above the volume support at $24.7. It’s a significant level on both the daily and monthly charts. On the daily, it is last October’s low which saw Intel and the market rally higher, while on the monthly provided the springboard in 2015 for Intel to rally to $68. But we can also see from the monthly chart, a failure to hold the current price level would take Intel into a waterlogged area of congestion with a low of $12 which seems almost unthinkable for a $108bn cap stock.
From a fundamental perspective, Intel does appear to have all sorts of problems – at least in the short term. I’m not going to list them here, but one metric that caught my eye is the company has dramatically reduced its dividend yield, which was approaching almost 6%, to one that now only offers a return of 1.9%. While this beats the current 1.7% provided by the average S&P500 stock, it is a massive decline and crushes the hopes of investors who hold the stock primarily for the dividend. This not surprising given Intel’s fall in revenue and upcoming spending on two new chip fabrication plants, which are expected to cost the company as much as $100bn over the next decade. However, on a positive note, Intel is likely to benefit significantly from recently passed legislation by Congress that puts almost $53bn towards boosting the US semiconductor industry.
Certainly, a stock to watch both from a technical and fundamental perspective and one which I will be following up on in the coming weeks.
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By Anna Coulling
NB – This post is for educational purposes only and does not constitute financial advice and must not be taken as a recommendation to buy or sell any of the instruments mentioned.
hi thanks