Thursday, June 21, 2007

Technical Thursdays: What’s the Deal with Intel?

Rare is the occasion when a devout ETF-only investment strategist ventures into the individual stock space, but it is hard not to notice the two incredibly bullish technical signals re Intel.

To begin, INTC’s momentum and MACD data are very positive. And its relative strength vis-à-vis the broad market has finally emerged after years of dismal results. But it is the plain old chart pattern stuff that really leaps out. As the chart to your left shows, the multi year downtrend line has recently been broken. Moreover, the upside breakout has taken place at precisely the top end of what looks like perhaps the single most powerful bullish pattern: an island reversal. Granted, this last point could easily be reversed, as the upside gap is all of a ¼ point. However, if the gap does not close, INTC will have produced the rarest of the rare: a one year plus island reversal.

Investment Strategy Implications

Since the bull market started over 4 years ago, the semiconductor group has trailed the broad market very badly. Competitive issues, among other factors, have been a drag on revenues, earnings, and corporate profitability. So, when the technicals of a leadership stock like Intel produce what appears to be a major upside breakout, it’s worth taking a closer look.

*Disclosure: Blue Marble Research has established long positions in INTC in several accounts that it manages. No shares of INTC are owned by Catalano nor by any members of his family.

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