Intel had a great 2017, finishing the year at $46.50 a share for a total gain of 27%. 2018 did not begin very well, though. The stock just fell to as low as $42.69 yesterday, after it became clear that major security flaws found in Intel’s processors make smartphones and PC’s vulnerable to hackers’ attacks. According to The Guardian, “Meltdown” and “Spectre” are “the worst ever CPU bugs”, because they affect virtually all computers, allowing hackers to steal personal and other data.
So it is quite easy to explain Intel stock’s weakness with recent news. However, by the time disaster struck it was already too late for traders and investors to protect themselves. The news is always late and that is why we prefer to rely on the Elliott Wave Principle instead. As it turned out, it managed to put us ahead of Intel’s current troubles.
The above-shown chart was included in “Intel Stock Keeps Its Elliott Wave Promise”, which we published over a month ago, on November 13th, 2017. Back then, sky was the limit as INTC was trading near $45.60 after an upbeat Q3 earnings report. Elliott Wave analysis, on the other hand, suggested that a noteworthy pullback in wave ii) should follow, once waves “iv” and “v” fulfill the impulse pattern in wave i). The updated chart below shows how the situation has been developing during the last month and a half.
Unlike Intel’s CEO, who appears to have sold shares in the company after finding out what was coming, we did not posses any inside information. Fortunately, traders and investors could actually do without it anyway, because the market has a habit of anticipating the news, not following it. In Intel’s case, Elliott Wave analysis put us ahead of wave “iv”, which formed a bottom at $42.67 on December 6th, 2017. Then ahead of wave “v” up, which lifted Intel stock to a new 17-year high of $47.64 twelve days later. And finally, ahead of the CPU flaw-inspired selloff, which dragged the price back down to $42.69 so far.
And while the media uses “the worst bug in history” to create a sensation, which, in turn, leads to panicked selling of Intel shares, Elliott Wave analysts see the current decline as nothing more than a natural correction, following a five-wave impulsive rally.
If this count is correct, we would see another leg down in wave “c” of ii) before the uptrend resumes in wave iii) up again. The big picture is still intact and, in our opinion, long-term investors should not be afraid of this temporary setback. It looks more like a “buy the dip” opportunity than the end of the world.
