Taiwan Semiconductor Takes a Hit on Trump Tough Talk
As the former president's comments on Taiwan military funding and China trade take toll on tech giant, keep a close eye on the charts.
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Shares of Taiwan Semiconductor Manufacturing Company Limited TSM are trading lower in the premarket on worries over U.S. export curbs on China and fears over former President Trump's comments that Taiwan should pay for its own defense.
Let's check out the charts and indicators.
In this daily bar chart of TSM, below, I can see that prices have made a strong rally from lows in September and October. Prices are extended (overbought) above the rising 200-day moving average line and we could see TSM drop to test the rising 50-day moving average line.
Trading volume has been active for months and suggests that many investors have recognized the trend and have bought. The On-Balance-Volume (OBV) line shows us a peak in March and that is interesting considering the uptrend - buyers and sellers of TSM have been more or less in balance the past four to five months. The Moving Average Convergence Divergence (MACD) oscillator is above the zero-line but likely to cross to the downside for a take-profits sell signal.
In this weekly Japanese candlestick chart of TSM, below, I can see the price action of the last three years. TSM has made a strong advance, but it has moved too far above the rising 40-week moving average line. A pullback has been overdue. The weekly OBV line has been very strong and gives us a much more bullish interpretation than the daily OBV line. The MACD oscillator is in a bullish alignment above the zero-line but recently started to begin narrowing.
In this daily Point and Figure chart of TSM, below, I can imagine prices opening in the $176 area. While the chart shows an upside price target through Tuesday's close this could quickly change to a downside price target.
In this weekly Point and Figure chart of TSM, below, I can see that a trade at $166 would turn this chart bearish. We'll see.
Bottom line strategy: Keep your TV on and tuned to the latest news. Traders who are long TSM should raise stop protection or reduce their exposure as Wednesday may be just the first round of selling.
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