Intel Stock Nears Chart Support Despite Disappointing Earnings Report

Intel (INTC) shares will remain on watchlists Monday after the chipmaker’s stock closed Friday’s trading session more than 9% lower following a disappointing quarterly earnings report, adding to mounting concerns over the company's costly turnaround plans. However, a key reversal candlestick pattern near a crucial area of chart support signals a potential shift in investor sentiment.

The company’s stock, which trades around 38% below its December 2023 peak of $51.28 and takes the mantle of the S&P 500’s worst performing tech stock so far this year, sank to a 10-month low last week after reporting first quarter sales that missed Wall Street’s estimates and issuing an uninspiring outlook for the current quarter.

Moreover, the Santa Clara, California-based company, once the largest semiconductor company in the world, now has a smaller market capitalization than traditional chip companies including Qualcomm (QCOM), Broadcom (AVGO), Texas Instruments (TXN), and Advanced Micro Devices (AMD), and of course, artificial intelligence (AI) chipmaker Nvidia (NVDA).

In addition to a soft earnings report, investors have become increasingly wary of the company’s turnaround plans to reclaim market leadership in the chip space, namely, its costly strategy to become a chipmaker for other companies that outsource their semiconductor manufacturing. 

Despite Intel receiving $8.5 billion in grants and $11 billion in loans as part of the Biden Administration’s CHIPS and Science Act of 2022 to expand its manufacturing facilities, the company’s capital investments totaled $43.4 billion as of Dec. 30, 2023, compared with $36.7 billion in the prior year. In addition, its newly created foundry business posted an operating loss of $7 billion in 2023 compared with $5.2 billion in 2022, with the company saying that it expects the unit to break even sometime between now and the end of 2030.

Turning to the charts, Intel shares have continued to move lower since completing a head and shoulders topping pattern in late January, with declines accelerating after the price broke down below a multi-month uptrend line and the 200-day moving average earlier this month.

However, despite gapping more than 9% lower on Friday, the stock’s price staged an intraday reversal to form a candlestick pattern known by technical analysts as a dragonfly doji, which typically signals a reversal back to the upside after a significant price decline. Interestingly, the pattern has formed near a key horizontal line around $30.50, increasing the likelihood that the stock may have found a floor of support.

Intel shares closed Friday at $31.88.

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As of the date this article was written, the author does not own any of the above securities.