INTEL reports earnings next week. Commentary from the Wall Street is almost universally positive.
In the middle of this bullishness, our screens, especially fund flows, show that the smart money is selling into strength.
If the earnings are good, the probability is that the good earnings are the result of replenishing inventory and building additional inventory ahead of Windows 7 launch and the holiday season. If the earnings are not good in this boom inventory build up time, it is a indication of slowing demand compared to anticipation.
It appears the profitable trade will be on the short side if the earnings and guidance are better than expected and the stock price spikes up. If the earnings and guidance are worse than expected, the trade is obviously on the short side. If the earnings and guidance are same as expected then there is no trade.
We need to be careful in shorting because seasonality typically means strength for
semiconductors and the overall tape is strong. Consider hedging the position with $SMH.
