Hey Income Hunters,

AI fever gave the chip makers a boost this year … 

From May to July the sector as measured by the VanEck Semiconductor ETF (Ticker: SMH) was up 35% (chart below) … Since then it has formed a bull flag pattern and may be positioned for a test of the top end of the channel in the weeks ahead.

Intel on the other hand has struggled to compete with the performance of the overall sector .. 

It has stumbled in internal manufacturing and suffered cost disadvantages as Advanced Micro Devices (Ticker: AMD) partnered with Taiwan Semiconductor Manufacturing Comp. (Ticker: TSMC).

Making Positive Moves

Intel is taking bold steps to its positioning in the sector. Management recently announced a spin-off of its programmable solutions group (PSG). This follows a successful spin-off of Mobileye. 

This move will raise capital and allow INTC to focus on gaining ground on its peers in the chip manufacturing process. 

Below is the option positioning report across all strikes for INTC … Notice the call buying above the market at the 45 strike. 

You can appreciate management’s plan on the spin-offs and bringing in equity through an IPO but it may be too late for INTC … Competitors have built a sizable lead in the industry. 

At best  I see INTC staying in a  32 – 37 trading range with their fair value price holding at 35. 

Technically there is a decent reward vs risk for a trade … Notice the up channel that has formed this year …

If you buy against the 50 DMA at 35.5 you can put a stop loss on a trade below 34 with an upside target of 41. A 5.5 to 1.5 reward to risk is reasonable. 

The backdrop for chip companies is uncertain as geopolitical risks create supply chain issues. 

However, from a technical perspective, INTC’s location offers a short-term trading opportunity …

Thanks for reading and as always … 

Live and trade with passion, my friend,

Griff