Tomahawk, WI 9/05/2013 (BasicsMedia) – Intel Corporation (NASDAQ:INTC) (Closed: $22.64, Up: 2.57%) opened strong with a gap up on Wednesday and remained firmly in the positive territory to close near the day high. The volume at 38 million was just at par with the average volume of 39 million. It closed above the previous 9 days’ highs, breaking out of a short term range.

The stock, just like almost all other IT stocks, had its golden days in the period of 1995 – 2000 when it hit an amazing high of $75.81 from the 1995 low of $5 levels. Such was the irrational exuberance in that period, as Schiller so aptly showed, that the stock doubled in the last 8 months before the top, from $37.50 to over $75. Then the Black September of 2000, when the stock crashed just vertically to $41 levels from the top in a single month and the bear market started in the stock. It found its initial bottom at $12.95 in 2002 and the final bottom at $12.05 in 2009. Since the 2002 bottom, the stock has moved in range with $29 as the upper boundary and $12 as the lower boundary. As long as this range is unbroken, the major trend remains unchanged too.

There are smaller but important ranges at play within the broader range. Currently the stock is moving in a range between $26 & $19. A break below $19 would take the stock at $16.50 – $16.75 first and then again at $12 levels. On the other hand, a break above $26 would face the big supply zone of $27.75 – $29.

In the coming months, if the stock manages to break above that $29 level, it would signal a major turnaround. Some supply could be expected at $35 – $37, but the momentum generated at that point should be sufficient to carry the stock through it. Investors can take heart from the quality the base building, which is nicely poised to launch a major rally.

In the weekly charts, we can see a bearish Head & Shoulders pattern with the neckline at $19, but this pattern would most probably be a failure. The rally from the November 2012 low of $19.23 is getting nice support from a trendline and as long as that line holds, more upside can be expected.

The last part of the fall from the June 2013 top of $25.98 lost the bearish momentum completely in the last few days. It was clearly evident from the indicators showing multiple positive divergences. MACD – Histogram was not making new lows with each price lows and actually hardly moved from the zero line at the latest low. It is a sign of complete bear exhaustion. The volume was dry too in the fall, showing no serious distribution taking place. The weekly RSI is poised to go above the zero line which would confirm the strength.

The investors could get in the stock if manages to move and stay above $22.85 this week but would do well to keep a stop loss below $19 levels.

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