Intel Blows Up But May Stage Rebound

Shares of Intel Corporation INTC were hit hard on Friday, falling more than 5%. This was the result of an earnings report that some investors thought was negative and they aggressively sold their shares.

However, there’s a good chance the stock stages a rebound from here. Not only is it oversold, but it has also reached a level that previously provided support.

Oversold means that the stock has reached an extreme below its recent average trading range.

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The red line on the chart below is two standard deviations below the recent 20-day average price. Statistics and probabilities theory state that all trading should be within two standard deviations of the average.

Intel has exceeded this important threshold to the downside. This will get the attraction of computerized trading systems that are based on statistics. They will be expecting a reversion to the mean so they will be buying.

Support is a level where there is more demand for a stock than there is supply. When stocks sell off and reach support levels, they typically rebound. This is what happened with Intel in early March.

Intel is both oversold and at support, so there’s a good chance the stock rebounds.