Taiwan Semiconductor Stock Is Struggling Ahead of Earnings

Taiwan Semiconductor Manufacturing Co. Ltd (TSM)  , the world’s leading manufacturer of semiconductor chips is on many investors’ minds these days for several reasons.

The company is set to report earnings this week so let’s take a look at the charts.

In the daily bar chart of TSM, below, we can see that the shares have been cut down sharply the past nine months. A low in July did not hold up for long and prices sank still lower. TSM trades below the declining 50-day moving average line and below the declining 200-day line.

The On-Balance-Volume (OBV) line has been weak since February telling us that sellers of TSM are more aggressive than buyers. The Moving Average Convergence Divergence (MACD) oscillator (MACD) is bearish.

In the weekly Japanese candlestick chart of TSM, below, we see a picture where the shares probably have further to fall. Prices are in a major decline and trade below the negatively sloped 40-week moving average line. No bottom reversal pattern and no lower shadows tell me that traders are not interested in buying at current levels.

The weekly OBV line is still in a longer-term decline. The MACD oscillator is bearish.

In this daily Point and Figure chart of TSM, below, we can see that the shares reached and exceeded a downside price target in the $72 area.

In this weekly Point and Figure chart of TSM, below, we can see a price target in the $45 area.

Bottom-line strategy: In the latter stages of a bear market the shorts get nervous and sidelined buyers anxious — the result can be a short-covering rally. TSM could experience one of these rallies at any time but the major direction is still down. Avoid the long side of TSM until a bottom forms.