Intel (NASDAQ 🙂 will report fourth quarter 2020 earnings today after market close. Consensus calls for earnings per share of $ 1.10, versus earnings per share of $ 1.52 for the same quarter last year, and $ 17.45 billion in revenue, down from $ 20 , 21 billion on an annual basis.
However, we think there is a good chance of a positive surprise from the Santa Clara, California-based chip maker based on a variety of fundamentals and the way the technical map is constructed.
Yesterday, our colleague, Haris Anwar, outlined the fundamentals}}, including the company's announcement last week that it would bring in a new CEO, as well as efforts by management to drive long-term growth, following the semiconductor giant was removed from its position as the world's most valuable chipmaker by NVIDIA (NASDAQ: {{6497 | NVDA).
While we agree that the stock is likely to rise higher, we disagree about the speed of that rise. We believe there is a potential for an immediate 15% profit. This is why:
After the 17.4% rise that stocks enjoyed following the announcement of the CEO shake-up, the stock price has fallen within a pennant formation, bullish after such rapid gains.
The reason it is expected to break upwards is that the current break is seen as a period when buyers are making extraordinary profits, while newer buyers are taking long positions, so the price does not fall. An upward breakout would confirm this view and show that buyers had acquired all available inventory at these prices and were upping the ante.
Bulls that already came out, because they guessed the sharp move second, now kick themselves for selling too early and come back in. At the same time, short sellers who were sure the move was excessive have to cover themselves up quickly.
Traders who had not yet recognized a trajectory will understand where things are going at this point. After the upward breakout, it is expected that most of the market will bet on stocks to stay higher. As it will indeed happen.
Additional factors to reinforce the technical significance of this pennant: Price formed an escape gap, after breaking loose from the declining channel (red) since its high point in June. It has bottomed out since July as it skipped the 200 MA. Notice where the follow-up pattern is forming – right on the downtrend since the January 2020 peak. After overcoming these four technical hurdles, bulls needed a breather.
In fact, if the pennant provides an upward break, buyers may have overcome four additional hurdles: (1) Complete a rising pennant, (2) Overcome the one-year downward trend, (3) Possibly blowing out a massive H & S summit since June 2018 (see below) and (4) Probably the 50 DMA will pull over the 200 DMA, creating a golden cross.
Will a 15% follow-up eruption from the pennant formation of the massive H&S Summit cause a 50-week bullish MA above the 200-week MA, reinforcing the bullishness of a failed H&S Summit? It could still turn into a double top, but that would only mean that our current view of a rally is correct.
All in all, this provides the foundation for a powerful bullish move, with the company's bottom line as the likely trigger. Charles Kirkpatrick, technical research specialist and author of & # 39; Beat the Market & # 39; says the failure rate here is 19%.
Warning: We don't know the future. We only interpret the price action based on historical results and our knowledge that the pennant failure rate is 19%.
Trading Strategies – Long Position Setup
Conservative traders should wait for an upward breakout with 3 percent penetration to reduce the chances of a bull trap, followed by a return movement that would demonstrate a base of support above the pattern.
Moderate traders would wait for the penetration of the USD 60 psychological level, and then wait for the pullout, for a better entry, if not retesting the bullish trend.
Aggressive traders could now step in, anticipating what the engineers point to as a powerful upward move, provided they understand the analysis and accept the added risk of a lack of confirmation of the actual breakout, to beat the crowd for the extra reward. The higher the risk, the higher the trading plan that a trader should commit to.
Here's an example.
Trade Sample
Admission: $ 59
Stop Loss: $ 56
Risk: $ 3
Target: $ 68
Reward: $ 9
Risk: Reward Ratio: 1: 3
Author's Note: This is just a sample, not the analysis itself, which is nothing more than a fundamental and technical analysis to deal with happiness. We don't know what's going to happen. We rather bet on statistics. Your timing, budget, and temperament also determine the level of success or failure of a transaction. If you don't know how to write a custom trading plan, take small risks as you learn.
