Don’t look now, but the tech sector’s mounting a comeback, even in the face of some criticism from President Trump. He accused “big tech” of suppressing his reach online, but that hasn’t stopped other companies (outside of Twitter and Alphabet) from soaring once again.
Most notably, semiconductor corporations are experiencing a miraculous recovery. It’s something that many investors didn’t see coming after Broadcom, the first semiconductor company to report financials for this earnings season, suffered a dismal Q2 2019.
Their report cast a pall on the industry’s top dogs, torpedoing share prices across the board just a few weeks ago.
But now that the dust has settled, it appears that the market still has some optimism left – enough, perhaps, to propel a certain stock to new heights after getting hammered in May.
In the weekly candlestick chart above, you can see that INTC has a lot going for it. First and foremost, a double bottom has formed since October of last year. Typically, double bottoms precede trend reversals, because the stock price refuses to trade past a level of support.
INTC share prices “bounced” off that support level a little over a month ago, and since then, has mostly been going up.
This stock, unlike other semiconductor companies, didn’t get hurt nearly as much by the Broadcom earnings report, because it was so heavily sold during the month of May.
It was a tremendous drop to be sure, but for opportunistic traders, a welcome one now that prices are heading back north.
Because of that, INTC shares are recovering after being woefully oversold, tipping the Stochastics somewhat higher than we’d normally like to see (something below 40).
In this case, though, that’s something I can live with so long as the price action signals a continued uptrend.
And sure enough, it does. The current weekly candlestick (which closes Friday afternoon) sits above the last six candle bodies, suggesting to us that prices could keep on rising. The 7-bar formation is almost “picturesque” at this point, showing a gradual, undulating reversal after INTC got crunched in May.
Finally, in the INTC chart we can see that a higher high was set back in April, well outside of the upper Bollinger Band.
Should INTC keep rising, it has plenty of room to run in this case, due to just how far away that upper BB has been pushed. However, whenever a stock drops like INTC did, it usually rises to about halfway of the total descent. Even then, though, going long from where share prices currently stand would still be very profitable.
So, while plenty of investors have given up on semiconductors after the Broadcom fiasco, I would argue that we might be in for a surprisingly positive, tech-driven July. Even if earnings aren’t sterling from the other players in the sector, for INTC, that might not even matter after getting battered so badly in May.
In that regard, INTC is in a somewhat unique position, where it sits in “prime setup” territory.
