Chart Wars: Between Nvidia, Taiwan Semiconductor, Which Stock Looks Set To Fly Higher?

NVIDIA Corporation NVDA and Taiwan Semiconductor Manufacturing Company, Ltd. TSM were each trading 1% higher on Monday despite the broad sector ETF SPDR S&P 500 consolidating with an inside bar pattern.

Both stocks have reached new all-time highs recently with Nvidia soaring to the $346.47 mark on Nov. 22 and Taiwan Semiconductor hitting a Jan. 13 high of $145. Since reaching their all-time highs both stocks have sold off, with Nvidia dropping 38.35% to reach a Jan. 28 low of $212.96 and on that same date Taiwan Semiconductors bounced up from a bottom at the 114.19 level, which represented a 21.25% decline.

While both semiconductor stocks have fallen lower, Nvidia and Taiwan Semiconductors have both printed reversal candles on their daily charts, which indicates higher prices may be on the horizon. Nvidia may have a potential political advantage, however, being a U.S. company because on Friday the U.S. House formally passed a China competition bill to increase chip production.

It should be noted, however, that events affecting the general markets, negative or positive reactions to earnings prints and news headlines about a stock can quickly invalidate patterns and breakouts. As the saying goes, "the trend is your friend until it isn't" and any trader in a position should have a clear stop set in place and manage their risk versus reward.

See Also: New Street Cautions Against Nvidia's Steep Downside: All You Need To Know

In The News: Taiwan Semiconductors printed a fourth-quarter earnings beat on Jan. 13 before the market opened, which caused the stock to soar 9.66% higher than the previous days’ close before the price action marked the top. The company reported earnings per share of $1.15 compared to the analyst estimate of $1.12.

Nvidia is set to print its next quarterly earnings after the closing bell on Feb. 16. When the company printing its last earnings report on Nov. 17, the stock flew 18.46% higher over the three trading days that followed. Traders and investors will be watching to see if Nvidia has a similar reaction to Taiwan Semiconductors’ stock.

The Nvidia Chart: Nvidia is trading in a confirmed uptrend, with the most recent higher high printed on Feb. 2 at $258.17 and the most recent higher low of $236.32 formed on Friday.

• On Monday, Nvidia was attempting to break up over the 21-day exponential moving average and if the stock is able to complete the task and trade above the area for a period of time, the eight-day EMA will eventually cross above the 21-day, which would give bull more confidence going forward.
• Nvidia looked to be printing a bullish Marubozu candlestick, which could indicate higher prices will come on Tuesday. If that happens, it will likely cause the stock to print another higher high in its uptrend.

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Nvidia has resistance above at $252.59 and $272.29 and support below at $230.43 and $208.88.

The Taiwan Semiconductor Chart: Taiwan Semiconductor may have reversed course into an uptrend when the stock printed a higher low on Feb. 3 near the $121 level. On Monday, the stock attempted to move up toward printing a higher high but failed due to weakness in the general markets.

• By early afternoon, Taiwan Semiconductor looked to be printing a doji candlestick, which indicates indecision. When a doji is found at the top of a trend it can indicate lower prices will follow.
• If Taiwan Semiconductor is unable to make a new high on Tuesday there is a likelihood the stock may settle into a triangle but if it falls below the most recent higher low, a downtrend may be on the horizon.
• Taiwan Semiconductor has resistance above at $125.15 and $128.88 and support below at $121.80 and $119.45.