Taiwan Semiconductor Rallies After Earnings and Charts Say the Party Isn't Over

Here's where this vital chipmaker's shares could be headed next.

Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) reported earnings Thursday for the three months ending in March. The CEO said a glut in global chip supplies, as well as "softening end-market demand," would likely clip overall revenues into the end of the year. Despite the caution, shares of the chipmaker are trading higher.

Let's check the condition of the charts and indicators.

In the daily bar chart of TSM, below, I can see a generally positive-looking chart. The shares have been correcting their strong gains into February. TSM moved sideways to lower but has been finding buying interest (support) around $85. TSM is testing the 50-day moving average line Thursday and trades above the bottoming 200-day line.

The On-Balance-Volume (OBV) line shows improvement from early January and tells me that buyers of TSM have become more aggressive than sellers. The Moving Average Convergence Divergence (MACD) oscillator is slightly below the zero line but some further price strength should soon get this indicator back above the zero line.

 

In the weekly Japanese candlestick chart of TSM, below, I see a mostly positive-looking picture. Prices trade above the bullish 40-week moving average line.

 

The weekly OBV line shows gains from October. The MACD oscillator is bullish but it has narrowed and should be watched closely for a bearish crossover.

 

 

In this daily Point and Figure chart of TSM, below, I can see a potential downside price target in the $69 area. A trade at $93 could turn this chart more positive.

 

 

In this weekly Point and Figure chart of TSM, below, I can see a possible upside price target in the $115 area being projected.

 

 

 

Bottom-line strategy: Taiwan will likely remain a feature in U.S./China relations but that does not mean we should steer clear of investing in TSM. Traders could go long TSM at current levels risking a close below $84. The $115 area is my first price target for now.

 

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