Shares of Intel (INTC) surged nearly 8% in extended trading on Monday following an update from CEO Pat Gelsinger on the company’s plans to cut costs and turn around its business. This comes after the stock hit a new multi-year low earlier this month but has since made a partial recovery, potentially forming a bullish reversal pattern.
Gelsinger announced in a note to employees that Intel has been making progress in reducing costs through layoffs, selling part of its stake in its Altera programmable chip unit, and trimming its real estate footprint. The company also plans to create a separate subsidiary for its chipmaking arm and produce chips for Amazon (AMZN) and the U.S. military.
The positive news from Gelsinger caused Intel shares to rise 7.9% in after-hours trading to $22.56. The stock had already gained over 6% during regular trading hours following a report that Intel had secured a contract to produce custom chips for the military. Despite these recent gains, the stock has still lost more than half of its value since the beginning of the year.
Analyzing Intel’s monthly chart, it is evident that the stock has faced significant selling pressure since December last year when it encountered resistance at the 50-day moving average. The stock has since fallen as much as 64%, with trading volumes increasing during the sell-off, indicating conviction behind the downward trend.
However, there is potential for a bullish reversal as the stock has made a partial recovery and is currently trading near its September high. This could indicate the formation of a hammer candlestick pattern, which suggests a bullish reversal. Investors should closely monitor key price levels on Intel’s chart to confirm this potential reversal.
One important support level to watch is the $20 area, which the stock reclaimed on Monday. This level represents a confluence of support from the psychological round number and a horizontal line that connects historical trading levels from 1997 to 2012. If the stock confirms a September hammer pattern at this level, it would be a significant win for the bulls.
If the downtrend continues, Intel shares could fall to around $17, where they would likely find support from a period of consolidation in the stock between 1997 and 1998. This level also aligns with troughs in 2006 and 2010, further strengthening its significance as a potential support level.
In the event of longer-term weakness, the $14 region may come into play. This area on the chart represents prominent swing lows that formed during the dotcom bubble correction of 2002 and the great recession in 2009. Buy-and-hold investors would likely seek entry points near these swing lows.
On the upside, if Intel shares experience a reversal, investors should pay attention to the $25 level, where the stock could face resistance from a horizontal line connecting multiple peaks and troughs between 1997 and February 2023. A move above this level could propel the stock towards $35, where it may encounter selling pressure near a trendline and the 200-day moving average.
In conclusion, Intel shares have surged after CEO Pat Gelsinger provided an update on the company’s plans to cut costs and turn around its business. The stock has the potential to form a bullish reversal pattern, but investors should closely monitor key support and resistance levels to confirm this reversal.
