Taiwan Semiconductor Hits Bullish Pivot — Signals It's Time to Buy

On Wednesday, I wrote a piece covering the semiconductor industry and semiconductor stocks as calendar year 2025 melted into calendar year 2026. The semis have really been, aside from a few of my "Stocks Under $10" names, my bread and butter for a few years. 

In that piece, I discussed a pressing need that I was feeling to get long some American Depository Receipts of Taiwan Semiconductor  (TSM) . While the very high-end chips are for now made in Taiwan, the firm has initiated itself to the federal government in the U.S. by building out two very large facilities in Arizona.

The already pressing demand for what Taiwan Semi can provide as a foundry to the world's truly elite GPU designers such as Nvidia  (NVDA)  and Advanced Micro Devices  (AMD)  only became that much more glaring last week once Reuters had reported that both Nvidia and Broadcom  (AVGO)  had been testing Intel's  (INTC)  18A chip technology and at least Nvidia had decided not to move forward as a client using that production process. Reuters reported that initial tests had led to customer satisfaction.

The reason not to give up completely on Intel is that designers such as Nvidia need more chips than Taiwan Semi can possibly supply as quickly as production can be increased. While one would think that this will result in higher prices for and increased margin on TSM's high-end products (a good problem to have), I find it interesting that also last week, Nvidia completed its planned purchase of $5 billion in shares of Intel. Even if Intel's foundry is not up to the level of excellence required, if Nvidia is not giving up, one can almost count on Intel catching up and doing it quickly.

There's News!

On New Year's Eve, Reuters (yes, again it was Reuters) reported that "The US Department of Commerce has granted TSMC Nanjing an annual export license that allows US export-controlled items to be supplied to TSMC Nanjing without the need for individual vendor licenses." 

The report added.... "This license, issued before the December 31, 2025 expiration of existing Validation End-User authorization, ensures uninterrupted fab (fabrication, foundry) operations and product deliveries."

Still, I Need to Be Long TSM 

Taiwan Semi reports in two weeks. The firm guided towards sales growth of 24% to 25%, but I think the story will be in the margins achieved. All five sell-side analysts that cover the stock have increased their earnings estimates since the start of the fourth quarter. 

There are two ways to look at TSM technically and these two ways are at odds with one another. There is the bearish take:

TSM had already put in a double top, which is breaking as we speak. Still, if the shares stop rising right here, we'll be looking at a triple top pattern of bearish reversal. ​That, however, is not what I see. I see a bullish pattern.

​I see an inverted head and shoulders pattern of bullish reversal/continuance with a $314 pivot. These ADRs have retaken their 21-day exponential moving average (EMA) and 50-day simple moving average (SMA), which gets both the swing crowd and the pros aligned. ​

Readers will also note that Relative Strength is rising, and is better than neutral, but is not yet technically overbought. In addition, all three components of the daily moving average convergence divergence (MACD) are postured bullishly at this time. 

I intend to initiate a long position in TSM, with that pivot triggered, once this article is published (so as not to front-run my own material).

Taiwan Semiconductor (TSM)

Price Target: $377

Pivot: $314 (created by pattern)

Add: Now

Panic: Loss of 50-day SMA (currently $293)

At the time of publication, Guilfoyle was long NVDA, AVGO, AMD, INTC equity.