Is Intel About To Roar? Technical View Shows Bearish Inklings

Intel Corporation INTC shares have been lagging the NASDAQ and the broader market badly in recent weeks and months now. The stock peaked in late 2014 and has not even come close to challenging those highs since. Can the company muster some positive fundamental news to create a tailwind for the stock?

What The Bulls See

Some cheap valuation metrics:

• A price-to-book ratio of 2.86, a price-to-sales ratio of 2.85 and a P/E ratio of 14 versus the 22 P/E of the S&P 500.

A clean balance sheet: Around $14 billion in cash reserves, a current ratio of 1.73 and a debt to equity ratio of only 24.58 percent.

Strong profits: Net profit margins of 20.95 percent and a strong, positive levered free cash flow of $9 billion.

A healthy dividend of 2.9 percent

What The Bears See

• A P/E of 14 that does not look as cheap when compared to the estimated 2015 revenue
• EPS growth rates of 3.8 percent and 9 percent, respectively

Related Link: Intel's Cloud Computing VP: 5 Years From Now We'll Be Wondering What Passwords Even Were

The Technical Take

Technicians note that Intel shares may be forming a "head and shoulders" topping formation on the daily chart. The head comes in at the December highs just under $38.

The left shoulder peak comes in at around $35.56, the peak from last September.

The stock has some resistance at $34.78, before testing what would be "right shoulder" resistance, though. If this bearish pattern plays all the way out, Intel would trade all the way down to the low $20s. Can the market remain this strong with a stock like Intel trading down 30 percent in the next several months?

Overall

Intel's technicals alone should tell prospective buyers to seek gains elsewhere. However, when the stock does potentially move down to the projected (ultimate) downside target in the low $20s, the soundness of the company's balance sheet and ongoing huge cash flows and profits could inspire significant long-term buying interest.