Thursday, May 3, 2012

Intel Corp (INTC) reacts from resistance of a 2-year price channel

Markets settled the day in bearish territory: the S&P500 slid 0.8%, the NASDAQ surrendered 1.2%, and the relatively defensive DJIA outperformed with a decline of only 0.5%.

Intel Corp (INTC) shares merit a closer look.

INTC, 4 y 1d
Intel declined today from a conspicuously overbought point, namely a touch yesterday of two-year price channel resistance on the daily bars chart. Moreover, yesterday’s price action, at which INTC incidentally set an 8-year high, brought the security to over $4.50 above its 200-day moving average. Such an occurrence over the past four years has always marked an unsustainable level of bullish sentiment (at least over the short term; see the oscillator on the lower portion of the above chart). 

INTC, 180 d 1h
The hourly bars chart likewise shows Intel shares at price channel resistance, although the lower line of the channel is admittedly poorly defined. It might be more apt to describe INTC as being at trendline resistance. The price-versus-SMA oscillator does not show the security as being particularly overbought.

In sum, a short position initiated yesterday above $29.25 would have been prescient and, in light of the above evidence, relatively high-probability. But the profitability of holding such a position beyond today’s knee-jerk reaction lower appears less certain.

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