Gordon noted that the chart of Intel has formed a head and shoulders top. This is a pattern that technicians often recognize as a reversal in trend. "You can see this move is clearly defined, and it looks like we're going to get a move down past the neckline of this pattern," said Gordon, founder of TradingAnalysis.com. "I think we could see a move down to $28." And Gordon believes the catalyst for the move lower could be the company's fiscal 2015 earnings release on July 15.
So to make a bearish bet on the stock and capture a potential decline on earnings, Gordon turned to the options market. Specifically, Gordon purchased the July 30.5-strike puts for $1.75 each. Since buying a put option allows a trader to sell a stock at a given price for a set time, this trade is profitable if shares of Intel fall below $28.75 by July expiration, or by next Friday.
"This is a good way to play Intel to the downside, as we expect to see increased volatility heading into earnings," added Gordon.
Intel is expected to report second-quarter earnings of 51 cents on July 15 after the bell, according to FactSet.