When we published our last update on Intel in January, the stock was down to less than $44.50 a share following news that major security flaws in Intel’s processors make smartphones and PC’s vulnerable to hackers’ attacks. The situation looked very bleak for Intel as many corporations and institutions threatened to sue the company over the issue.
However, we knew from experience that the market usually anticipates the news and is very quick to absorb it. So instead of joining the bears in their panic and sell INTC, we decided to take a look at its stock chart through the prism of the Elliott Wave Principle. Surprisingly or not, it suggested the trouble Intel found itself in actually provided a buying opportunity. And indeed, investors who took advantage of it pocketed a nice 30% profit five months later as Intel shares changed hands for as much as $57.60 on June 4th.
Alas, the stock plunged back to $46.43 by July 30th, erasing most of this year’s gains in less than two months. Intel closed at $49.48 yesterday, so it is a good time to see if the recent decline is another chance to buy in or the beginning of a larger selloff.
The 4-hour chart gives us a reason for optimism. The $57.60 top seems to be the end of an ending diagonal wave (v) within a larger third wave. Since the big picture outlook is still pointing north, it follows the pullback to $46.43 is nothing more than a fourth wave, 4, within a larger five-wave impulse, which is still in progress. Furthermore, wave 4 appears to have found support near the 38.2% Fibonacci level, not to mention its clear a-b-c corrective structure.
If this count is correct, Intel’s decline is an excellent buy-the-dip opportunity, given that wave 5 is supposed to exceed the top of wave 3. The $60 mark looks like a reasonable bullish target, as long as the stock trades above its last swing low at $46.43. The risk/reward ratio of this trade is a very decent 3.4.
Did you like this analysis? Learn to do it yourself with our eBook Elliott Wave guide!
