Texas Instruments Inc. (TXN) is in the news this morning as investors react to its mixed third-quarter results and its forecast of a softer market ahead for semiconductors. Prices are down sharply , but this is just a continuation of a downtrend that has been in place from earlier this year.
I last visited with the charts of Texas Instruments in August. At that time I wrote, "TXN has traded sideways for months and it could make an upside breakout. Nothing in technical analysis is 100%, so traders should wait for the breakout. Wait for a trade at $120 to go long and then risk below $110 looking for $154 on the upside." As things turned out TXN never got to $120 and it subsequently rolled over and over. A new low for the move down was made Tuesday and the pre-market trading on Wednesday is definitely not encouraging. Let's check out the charts and indicators again.
In this daily bar chart of TXN, below, we can see that a number of bearish clues unfolded in the past few months. A pattern of lower lows and lower highs (also called a downtrend) developed from August to now. The slope of the 50-day moving average line turned negative in the latter part of August and this month it crossed below the flat 200-day moving average line for what is commonly called a dead cross. Like the name implies, this is a bearish signal.
The On-Balance-Volume (OBV) line made a peak in July and has been moving lower, telling us that sellers of TXN have been more aggressive. The daily Moving Average Convergence Divergence (MACD) oscillator moved below the zero line in September for an outright sell signal. It is sill bearish.
In this weekly bar chart of TXN, below, we can see that prices are below the declining 40-week moving average line. The weekly OBV line shows a peak in June and weakness since then. The weekly MACD oscillator moved to an outright sell earlier this month.
In this Point and Figure chart of TXN, below, we can see the new low for the move down at $95.50. A downside price target of $88.89 is being projected. Chart support on the weekly bar chart (above) could be found in the $85-$75 area from last year.
Bottom line strategy: TXN is likely to be under selling pressure for the near term. Prices could retest the support area beginning around $85. Do not be in a rush to try to pick a low or bottom for this stock.