Intel Shares Gently Pull Back: A Technical Breakdown

Intel Corporation INTC have pulled back mildly along with the rest of the U.S. equity markets this week. The damage in Intel's case, however, was mild compared to many other technology darlings (witness the action in Qualcomm, Cisco, Netflix, Twitter and even Apple in recent days).

Does the stock's relative outperformance bode well for when the market turns back to the upside? Do the company's fundamentals justify a big rally from current levels (just off the 52-week highs)? Let's take a look.

What The Bulls See

• Some cheap valuation metrics: A price-to-sales of 3.23.
• Great 19.4 percent profit margins that create levered free cash flow of over $8 billion annually.
• A clean balance sheet: Cash of $15.76 billion versus total debt of $13.33 billion, a debt-to-equity ratio of 23.77 percent and a current ratio of 1.85.
• A Treasury-beating dividend of 2.4 percent.

What The Bears See

• A P/E ratio of around 15, which seems expensive compared to 4.1 percent estimated revenue growth and 6.3 percent estimated EPS growth for 2015.
• A slightly rich price-to-book ratio of 3.18.

Technical Outlook

Technicians note that Intel has pulled back to one potentially attractive entry point for the bulls at just above $36. That is where the short-term uptrend line, which started at October's bottom, comes into play. Below that level, the next support comes in at the previous highs near $35.33. Resistance for the stock comes in at the previous peak at $37.90. Above that, round number resistance may be a factor at $40.

Overall…

The immediate upside target is the recent high at just under $38. A breakout above that may lead to a test of $40 and beyond. A break and close below $36, however, could mean trouble for the bulls in the short-term.