DailyPlay – Opening Trade (INTC) – March 27, 2024

INTC Bearish Opening Trade Signal

Investment Rationale

With semiconductor stocks losing momentum over the past few weeks, INTC’s strength is starting to show cracks and at risk of a pullback. After being in the lead of the semiconductor industry for nearly 2 decades, Intel’s design and fabrication model became their Achilles heel. Ever since INTC has been playing catchup, and early last year, investors started to pay attention, but perhaps the stock is starting to get ahead of itself on the back of an AI boom. This week’s news that China is phasing out INTC and AMD chips from their government usage will likely add further downside pressure.

Technical Analysis

If look at a Chart of INTC over the past 18 months, the stock has doubled from below $24 to just over $50 at the end of last year. However, just after reaching those 52-week highs, INTC has underperformed the market considerably. The momentum turning negative, coupled with the poor relative strength, suggests INTC could be headed for some further downside toward its $37 breakout level.

INTC – Daily

Fundamental Analysis

Looking at the business, INTC is now trading at the richest valuation we have seen over the past decade at over 31x forward earnings. This is while analysts do not expect EPS and Revenues to recover to 2021 levels until 2027. There are a lot of unknowns with how the industry will transform with AI over the next 12-24 months, that I believe the current valuation is priced too high. Additionally, INTC’s historical valuation has ranged between 10-15x forward earnings over the past decade, and it’s now priced at double that. This leads to risks to the downside as relative strength and momentum slows for INTC.

Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 12 Contracts May 17th $42/$37 Put Vertical Spreads @ $1.82 Debit.

Total Risk: This trade has a max risk of $2,172 (12 Contracts x $182) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $182 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that recently started to pull back from an area of resistance.

1M/6M Trends: Bearish/Neutral

Relative Strength: 8/10

OptionsPlay Score: 115

Stop Loss: @ $0.91 Credit. (50% loss of premium paid)

View INTC Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Tuesday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

View INTC Trade