Intel Corporation: Separate the Signal from the Noise and Buy INTC Calls

We had some coverage on Intel Corporation (NASDAQ:INTC) last year INTC options has consistently delivered in line with our past coverage of the stock. Hence, I consider it expedient to take another look at Intel as we round up options trading activities for January.

Intel Corporation with its market capitalization of $166.57B is one of the leading manufacturers of microprocessors in the world. In fact, the company is a dominant player in the global supply of semiconductors that are produced in its facilities in China, Israel, Malaysia and Ireland. Intel designs and manufactures integrated digital technology platforms consisting of a microprocessor and a chipset.

Why Intel is a Great Pick for 2015

Many people will find it very hard to find reasons to be optimistic about the prospects of Intel, considering the fact that global PC sales are declining in recent years. However, PC sales seem to be stabilizing as Gartner posits that PC sales are likely to touch a two-year break-even point by the end of 2015. Hence, Intel is on track to record an improvement in revenues this year.

However, I am most excited about the possibilities that Intel has for recording improving margins this year as the company’s Vietnam production plant holds an impressive value proposition. In 2010, Intel began production in Vietnam. Vietnam is very important to Intel in terms of cost-effectiveness in that Vietnam offers production and labor costs below what is obtainable in China.

In fact, the labor costs in Vietnam are as low as one-third of what’s obtainable in China. The best part is that Vietnam shares borders with China; hence, Intel could produce its chips at a lower cost and still have ready access to the large market that China offers.

In essence, we can expect Intel to deliver impressive growth in its top and bottom lines as PC sales continue to improve this year. More so, Intel should deliver impressive margins in relation to industry peers and thus, we can expect the bullish thesis on Intel to hold.

Interesting Chart Pattern

Intel Corporation

The chart above shows how the shares of Intel have traded within the last one year. You will observe that the stock has a been stubborn in its bullish ascent in the last one year and it sports a bullish trend line (Blue) that ends around $37.80.

Much of the points that are material to our trading of Intel’s stock options are evident inside the circle shaded in light purple. You will notice that the stock has established a $35.20 support level (Green line) in December 2014 and earlier in January 2015. You will also observe that the stock has a $37.90 resistance that also constituted its 52-week high.

However, the stock has broken down below its $35.20 support to trade around $34 for much of this week. Interestingly, the breakdown below the support seems to have bottomed out as Intel records a 0.41% gain to a $34.33 trading price around as soon as markets opened today (9:35 AM EST). In addition, an RSI of 34.87 suggests that the stock has been pummeled enough as it hovers a little above “Oversold” level.

How to Trade INTC Options

I am optimistic about the prospects of Intel Corporation and the aforementioned reasons have encouraged me to be bullish on the stock. I recommend buying INTC calls and you’ll do well to consider staying long in time for when Intel delivers it Q1 2015 earnings on April 13. Intel call options are mostly in the red, but if you are bold enough, you should join me in buying the INTC Apr 2015 35.000 call (INTC150417C00035000) at an asking price of $1.17. Remember to set a stop/limit loss order at $1.12.

 

— Daily Option Alerts

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