TAIWAN SEMICONDUCTOR-SP ADR (NYSE:TSM) Shows Strong Technical Breakout Potential with High Ratings

Technical breakout strategies focus on identifying stocks with strong trends that are consolidating before possibly continuing their upward movement. By pairing a high Technical Rating (showing strong price performance) with a high Setup Rating (indicating a clear consolidation pattern), traders look for chances where a breakout might lead to significant gains. TAIWAN SEMICONDUCTOR-SP ADR (NYSE:TSM) currently matches this approach, showing both technical performance and a solid setup.

Technical Performance: A Leading Stock

TSM receives a top Technical Rating of 10 from ChartMill, highlighting strong performance across different timeframes. Key points from the technical report include:

• Trend Direction: Both short-term and long-term trends are positive, with the stock above all major moving averages (20-day, 50-day, 100-day, and 200-day). These averages are also rising, supporting the upward momentum.
• Strong Performance: TSM has done better than 89% of all stocks over the past year and ranks in the top 18% of its Semiconductors & Semiconductor Equipment industry group.
• Near Highs: The stock is close to its 52-week high of $248.28, though its movement aligns with the broader market (S&P 500 is also near highs).

This technical strength suggests TSM is a leading stock, an important factor for breakout strategies. Stocks with high Technical Ratings often maintain trends longer, lowering the chance of false breakouts.

Setup Quality: Consolidation Before Possible Breakout

With a Setup Rating of 8, TSM displays a promising consolidation pattern:

• Support and Resistance: The stock has moved between $226.31 and $248.28 over the past month, with a clear resistance zone at $245.60–$245.61. A breakout above this level could signal further gains.
• Narrowing Action: Recent price movement has tightened, with the stock pulling back toward its 20-day SMA ($237.64), which now acts as support. This pullback could offer an entry point if momentum returns.
• Risk Control: A stop-loss below the support zone at $235.19 (4.25% below the suggested entry) provides clear risk limits.

The setup fits the strategy’s goal of entering stocks during consolidations within upward trends, offering good reward/risk potential.

Trading Tips

While the technicals and setup are strong, traders should:

• Watch the $245.60 resistance level for confirmation of a breakout.
• Consider broader market conditions (S&P 500’s short-term trend is positive, but long-term trend is neutral).
• Adjust position sizes to manage portfolio risk—the report suggests allocating ~23.55% of capital to keep total risk at 1%.

For more technical breakout ideas, check the Technical Breakout Setups screen, updated daily.

Disclaimer: This analysis is not investment advice. Always do your own research and use risk management strategies before trading.