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Taiwan Semiconductor (TSM) Stock Has Fallen 11.87% in the Past Month. What’s Next?

Simon Mugo trader
Updated 6 Oct 2021

Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM) stock has fallen 11.87% over the past month and is currently trading at a critical support level.

The latest decline in TSM stock is driven by multiple fundamental factors, including the ever-present threat from China, which regards Taiwan as one of its territories.

The US is also involved in the conflict, given that it would like to keep China as far from Taiwan as possible to ensure that the chips supplied by TSMC are not tampered with by China.

Despite all the fundamental reasons behind TSMS stock price decline, I am most interested in the stock’s price chart, which paints a fascinating picture.

The chart below shows that TSM stock has been trading in a range marked by a high of $125 and a low of $108. Each time the stock price hit one of these levels, it quickly reversed course and headed in the opposite direction.

Taiwan Semiconductor shares are currently trading at the bottom end of the trading range following last months decline. If the trend continues, I would expect the shares to revere course and head higher sooner rather than later.

However, a convincing break below the support level could usher in further declines as the bears would assume further control of the price invalidating the bullish thesis outlined here.

From a fundamental perspective, TSMC continues to lead its peers in the global chip manufacturing industry with cutting-edge technologies such as the 5nm manufacturing process that most chip manufacturers struggle to adapt.

Apart from the threat from China, TSMS remains well-positioned to continue dominating the global chip market for the foreseeable future.

*This is not investment advice.

TSM stock price.

Tradingview chart of Taiwan Semicondutor stock price 06-10-2021

TSM stock price is down 11.87% in the past months and seems ready to rally higher. Will they?

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Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading