Taiwan Semiconductor Breaks Resistance Levels: Outlook and Potential Support Zones

Taiwan Semiconductor (NYSE:TSM) has recently surpassed major long-term resistance levels after reporting strong Q1 earnings driven by global demand for advanced chips used in AI systems. The company anticipates continued growth in demand for AI and server chips throughout 2024, particularly from key customers like Apple and Nvidia. TSM’s stock prices have surged, indicating potential for further gains ahead.

Q1 Performance and Outlook

TSM’s Q1 earnings exceeded analyst expectations, with net revenues reaching $18.87 billion and net income at $6.95 billion, surpassing consensus estimates. The company anticipates continued strength in demand for 5-nanometer and 3-nanometer chips, with better-than-double revenue growth expected from AI server chip offerings. Q2 revenue estimates range from $19.6 billion to $20.4 billion.

Technical Analysis

TSM’s stock prices have broken through major long-term resistance levels, signaling potential for further gains. Monthly charts show sustained bullish momentum, supported by strong support levels at the 100-month and 50-week exponential moving averages. Weekly charts confirm bullish momentum, with prices breaking above uptrend price channels and positive readings in the MACD.

Potential Support Zones

In the event of corrective downside moves, Fibonacci retracement analysis identifies potential support zones. The 23.6% Fibonacci retracement, near $135, has already been breached, with support at the 20-week exponential moving average. Further support levels include the 38.2% retracement near $120.60, the 50% retracement below $109, and the 61.8% retracement above $97.30.

Conclusion

Taiwan Semiconductor demonstrates strong earnings performance, positive corporate outlook, and technical indicators supporting continued share price gains. Despite near-term risks related to seasonal changes in smartphone demand, the widespread adoption of AI systems is expected to drive future earnings growth. Potential support zones provide opportunities for investors to establish new buy positions in case of corrective downside moves. Overall, TSM presents a compelling investment opportunity with the potential for sustained growth.