Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) seems poised for a price surge based on its latest charts. The company manufactures, packages, tests, and sells integrated circuits and other semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the United States, and internationally.

It provides various wafer fabrication processes, such as processes to manufacture complementary metal- oxide-semiconductor (CMOS) logic, mixed-signal, radio frequency, embedded memory, bipolar CMOS mixed-signal, and others.

Bullish Indications

#1 Symmetrical Triangle Pattern: The daily chart shows that the stock has recently formed a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as purple lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. The stock is also trading above its 200-day SMA, indicating that the bulls are still in control.

TSM – Daily Chart

#2 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.

#3 Bullish RSI: The daily chart shows that the RSI is currently nearing 50 and moving higher. This is a possible bullish sign.

#4 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a resistance-turned-support level. This level is marked as a pink dotted line. This looks like a good area for the stock to move higher. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are still in control.

TSM – Weekly Chart

#5 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart as well, and is also moving higher from oversold levels. This is a possible bullish indication.

#6 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has currently moved up from below the –DI and +DI lines. This indicates possible bullishness.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, you can purchase shares of TSM above the price of around $343.70.

TP: Our target prices are $365.00 and $385.00 in the next 3-6 months.

SL: To limit risk, place a stop-loss at $331.00. Note that the stop-loss is on a closing basis.

Our target potential upside is 6% to 12% in the next 3 to 6 months.

For a risk of $12.70, our target rewards are $21.30 and $41.30. This is a nearly 1:2 and 1:3 risk-reward trade.

In other words, this trade offers nearly 2x to 3x more potential upside than downside.

Risks to Consider
The stock may reverse its overall trend if it breaks down from the symmetrical triangle pattern with high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.

Happy Trading!

Tara

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