EOT Trade Alert – February 11, 2010

| February 11, 2010

February 11, 2010

Trade Alert:

   Buy INTC July 15 2010 $20 Calls at $1.50 or better

Company Background:

Intel (INTC) is a semiconductor chip maker.  The company develops the advanced digital technology found in all types of products.  If there’s a chip in it there’s a good chance it’s, we’ve all heard the slogan, “Intel Inside”.

Short-Term Catalyst:

Intel’s products are seeing a new phase of demand from consumers and businesses. This phase could last as long as two years.  And along the way it will fuel strong revenue and earnings growth for Intel.

You see, the recession put a big dent in tech purchases.  Businesses stopped buying new PCs and other products powered by Intel’s chips.  Now they’re beginning to make up for lost time.

Consumer demand for new PCs has surged thanks to Microsoft’s (MSFT) latest operating system, Windows 7.  PC purchases should remain strong as the economic recovery continues.

On the business side, the Commerce Department recently said businesses spending on equipment and software rose by an annual rate of 13.3% in the fourth quarter.  That’s the fastest pace since 2006!

Despite mounting evidence of economic recovery and Intel’s improving revenue and earnings, many investors have let fear cloud their judgment.  It’s resulted in Intel’s shares being severely undervalued.

Right now INTC’s forward Price to Earnings (P/E) Ratio is 11.92.  Over the last ten years, Intel’s median P/E is 26.  So even at a conservative P/E of 19, INTC is worth $33.

As investors’ fears subside, leading tech companies should pull the markets higher.  And companies like INTC who are undervalued should be amongst the biggest winners.

Trade Details:

Underlying Stock Symbol: INTC
Current Bid-Ask Price: $1.36 – $1.39
Option “Buy Up To” Price: $1.50
Break-Even On Stock At Expiration: $21.50
Maximum Risk Per Contract: $150

Exit Strategy:

INTC is trading at $19.69 per share.  Resistance levels will be at $21.50 and again at $25.  Remember, we want this stock to move higher.  Support levels will be at $18.50 and $18.  Conservative investors should look to exit at the first support or resistance level.  Aggressive investors may want to hold for a bigger move.



Category: EOT Trade Alert

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