For investors looking to join solid fundamental growth with good technical entry points, a multi-layered screening method can be very useful. One approach finds securities that show high earnings momentum, sound technical condition, and a positive chart pattern ready for a possible move higher. This method joins the ideas of growth investing, which looks at firms with rising profits and sales, with technical study to choose when to enter leading stocks. By setting a lowest score across special ratings for High Growth Momentum (HGM), Technical Analysis (TA), and Setup Quality, the screen works to find stocks where solid fundamentals are meeting with a technically good and well-timed arrangement.
TAIWAN SEMICONDUCTOR-SP ADR (NYSE:TSM) appears as a top choice from this screen, having a High Growth Momentum Rating of 6, a Technical Rating of 7, and a Setup Rating of 7. This mix indicates the chipmaking leader is not only showing fundamental strength but is also forming a possible entry point on its chart.
Fundamental Growth Momentum
The High Growth Momentum Rating brings together several important growth and momentum measures, and TSM's score of 6 shows good base strength. The rating focuses on recent quarterly momentum, speed of change, and positive analyst changes, all important for the "M" in momentum investing.
- Solid Earnings Path: The company has shown notable year-over-year EPS growth, with the latest quarter up 34.9%. While this is slower than the prior quarter's 39.1% growth, it comes after a time of very high growth above 60%. For the next quarter, analysts expect growth to speed up again to 47.5%.
- Growing Profitability: A sign of a good growth company is turning revenue into profit at a higher rate. TSM's profit margin has grown steadily, from 42.7% two quarters ago to 48.3% in the last reported quarter. This growth in profitability adds positively to the HGM rating.
- Consistent Results and Positive Changes: TSM has exceeded EPS estimates in each of the past four quarters, with an average beat of 4.35%. Also, analysts have increased their estimates, with the average EPS forecast for the next year raised by 16.6% over the last three months. This mix of consistent results and increasing positive view from analysts is a central part of momentum methods.
Technical Condition and Market Standing
Aside from its fundamentals, TSM shows sound technical condition, as described in its technical analysis report. A Technical Rating of 7 puts it clearly in an upward trend. The report notes that TSM performs better than 93% of all stocks over the past year and is trading in the higher part of its 52-week range, matching the wider market's place. Its long-term trend stays positive, a key point for momentum investors who follow the trend.
Important technical good points include:
- Solid relative strength, performing better than most of the market.
- A steady pattern of increasing prices on a yearly basis.
- Trading above important rising moving averages (SMA50, SMA100, SMA200), confirming the long-term upward trend.
A Positive Arrangement for Entry
While a solid trend is important, a good entry point is needed for risk control. This is where the Setup Rating of 7 becomes important. The technical report states that TSM "shows a reasonable setup pattern," with prices settling recently and activity slowing. After a notable rise, the stock has been trading in a band between about $332 and $390 over the past month and is now near the lower part of that band.
The arrangement is described by:
- Settling: The recent trading band lets the stock absorb its earlier gains, possibly gathering force for its next move.
- Clear Support: A defined support area is seen between $336.70 and $341.13, made by a mix of trend lines and moving averages. This gives a logical area for a stop-loss order, setting the risk of a trade.
- Slower Activity: Lower activity during settling often comes before notable breakout moves.
The report proposes a possible trade arrangement with an entry point above $361.10 (a move above recent resistance) and an exit below the support area at $336.69, giving a defined, limited-risk situation that fits with breakout trading methods.
Conclusion
TAIWAN SEMICONDUCTOR-SP ADR presents a strong case for growth and momentum-focused investors. It meets the central fundamental needs of solid and speeding earnings, growing profit margins, and positive estimate changes. At the same time, its chart shows the stock is a market leader in a confirmed long-term upward trend that is now giving a settled, lower-activity arrangement with clear risk limits. This meeting of high growth momentum and a good technical arrangement is exactly what the screening method aims to find.
For investors wanting to find other stocks that meet these joined needs of high growth momentum and technical breakout arrangements, you can view the live screen here.
Disclaimer: This article is for information only and does not make investment advice, a suggestion, or an offer to buy or sell any security. The study is based on given data and should not be the only base for an investment choice. Always do your own study and think about talking with a qualified financial advisor before making any investment. Trading has risk, including the possible loss of principal.