Intel (NASDAQ 🙂 is expected to exceed expectations when it announces its results after the closing bell on Thursday.
The chip manufacturer is expected to report $ 1.11 earnings per share with a revenue forecast of $ 18.53 billion, compared to $ 1.06 EPS and $ 15.68 billion in revenue for the past year.
Crushing expectations are clearly a good thing – until it becomes clear to traders that the bar may have been set low. So after the Q2 report, anything could happen.
Investors could kick the can down the road, like in: pushing prices up in hopes of not getting into the creek without a paddle; or they could determine that valuations of about $ 60, in line with levels prior to January operating results before COVID-19 hit the markets, are not warranted. It may have to do with business guidelines, after Intel scrapped April's full-year forecast in April.
We may not be able to fully predict the fundamentals, but you can recognize this ambivalence in the technical graph.
The stock has been trading flat since early April, developing an H&S summit, complete with a decisive downward breach.
The MACD, RSI and ROC are declining, although yesterday's price hike has fallen as the latter two peeked above their downward trendlines. The MACD produces a bullish cross, but from the mid-range, which is not such an impressive signal as if it came from an oversold condition.
So we see that indicators, like the price, are inconclusive since a one day outbreak is not necessarily sustainable and the MACD is weak. Also, the volume is still moving in the opposite direction of the price, indicating ambivalence among traders. The current price hike is taking place at low volume, a pattern that supports the H&S scenario.
This drive shows a lack of decisiveness among the traders. A downward break from the $ 57 neckline would complete a reversal, while a move above the June 5 high of $ 65.11 would cause a pattern failure or eruption, which would trigger momentum in the opposite direction of the pattern's trajectory if traders change positions accordingly.
Trading Strategies
Conservative traders will wait for a pattern resolution, with a breakthrough or failure including a 3% + 3 days filter (preferably including a weekend) to avoid a fall and a return motion to verify the motion.
Moderate traders would also wait for the structure to self-resolve, expecting a 2%, 2 day outbreak, then a corrective move, for better access, not necessarily as evidence of trend.
Aggressive traders would go short or long, after penetrating 1% in both directions.
Trade Example – Aggressive Short Position
Entry: $ 56
Stop-Loss: $ 58
Risk: $ 2
Target: $ 48
Reward: $ 8
Risk-reward ratio: 1: 4
