Can Intel (INTC) Buck Its Earnings Trend?

The share prices for Intel Corporation (INTC) have recently fallen below their 20-day moving average as investors brace for the company's fiscal fourth quarter earnings report. Intel shares have averaged a 9.7% decline over the past six quarters, exceeding the implied option straddle move four times out of six. Analysts expect the company to announce $0.91 in earnings per share (EPS) and $18.36 billion in revenue. Intel was one of few companies to underperform in 2021, and investors will be anxious to see if the chipmaker can buck the trend.

Intel has surprisingly outperformed the technology sector and semiconductor industry so far in 2022. The company recently announced plans to invest more than $20 billion in two new semiconductor plants in Ohio, and CEO Pat Gelsinger recently returned to Intel.

Recent news could be why option traders appear to be placing bullish bets on the Intel share price in the near term. The open interest for Intel seems to illustrate that traders are buying call options and selling puts. This bullish option activity has continued despite the Intel share price recently falling below its 20-day moving average.

Current Trends

Comparing recent price action and option trading can provide insight into the overall sentiment that traders and investors possess toward a company's future performance. The key to maximizing this insight is to understand the context in which the price behavior took place. The chart below illustrates the price action for Intel shares as of Monday, Jan. 24, illustrating the setup ahead of the earnings report.

Since the chipmaker reported earnings in October, the Intel share price has traded briefly above or below its 20-day moving average. The share price briefly rose to an above average range in early 2022 before falling to a below average range in the week before earnings. The price has recently closed in this range as depicted by the technical studies on this chart.

The studies are formed by 20-day Keltner Channel indicators. These depict price levels that represent a multiple of the average true range (ATR) for the stock. This array helps to highlight the way the price has risen from the middle portion of this range to the upper bounds. This price move from Intel shares implies that investors could be losing confidence in Intel as the earnings report approaches.

The chart also highlights the performance of Intel stock after reporting earnings for the previous quarter. After reporting earnings in late October, Intel stock fell 11.6% the day of reporting earnings, then proceeded to meander around the 20-day moving average for much of the quarter. This is important to consider if traders and investors are anticipating a similar post earnings move for Intel stock for this quarter.

Macro Performance and Options Look

Price action, in a vacuum, theoretically can indicate the overall sentiment toward any particular stock. However, providing further context to this price action can paint a clearer picture, while illuminating key details for chart watchers. The chart below illustrates the recent price action of Intel with State Street's Technology Sector ETF (XLK) and iShares' Semiconductor ETF (SOXX).

It's evident on this chart that Intel, a notable underperformer over that past year, has recently been ahead of its sector and its industry, both of which have been relatively beleaguered of late. Over the past month, Intel stock has fallen 2.4%, compared to 11.6% and 13.5% declines for XLK and SOXX, respectively, during this time frame. This could mean that it's time for the underperforming Intel to reverse fortunes compared to its wider market.

Intel's performance against the wider market is intriguing considering the recent activity of option traders. At first glance, it appears option traders are bullish toward Intel stock, as recent trading volumes featured 145,000 calls compared to 108,000 puts.

The open interest for Intel is likewise bullish at first glance, as it features 1.3 million calls compared to 943,000 puts. Order sentiment remains bullish as well, as 71% of the total contracts traded over the past month have been call options.

For the Jan. 28 expiration date, the open interest features 60,000 calls compared to 45,000 puts. Out-of-the-money call options also decline at a much slower rate than out-of-the-money puts. The single option with the highest open interest is the $55 call, with 6,800. This represents 5% upside to the current share price of Intel.

Looking Ahead

While perhaps not the first that comes to mind when thinking of bellwether stocks, it's possible that the earnings results of Intel could have an effect on indexes directly. A positive report could lift other stocks in the sector such as Taiwan Semiconductor Manufacturing Company Limited (TSM), NVIDIA Corporation (NVDA), or Broadcom Inc. (AVGO). No matter what the report says, Intel's earnings could affect exchange traded funds such as XLK, SOXX, or even Invesco's QQQ Trust (QQQ). 

Wrapping Up

Investors will keep an eye on whether Intel can break its recent earnings-based share price decline streak. While the company has appeared to make strides in the headlines, the real story will become apparent when Intel reports earnings after the market closes on Wednesday, Jan. 26. Option traders appear to be positioned for upside in the Intel share price in the near term.