Taiwan Semiconductor
Shares of the largest semiconductor chip manufacturer in the world traded 5% lower today in the wake of their latest earnings report.
Taiwan Semiconductor (TSM) released their quarterly earnings report this morning before the markets opened and the news was good.
For the quarter, the company beat earnings estimates by $0.08, beat their revenue guidance, and guided the next quarter’s revenue forecast above the market’s expectations.
The report was strong, but there are a few catches.
- First, the company is still recovering from the April 3 earthquake in Taiwan. The company’s planning and preparation allowed it to recover full production by the end of the third day after the earthquake.
- The earthquake damaged wafers that were in production that were scraped by the company. That inventory will be rebuilt in the second quarter. That expense is going to bring the company’s second quarter margins down.
- The company also forecasted a slower recovery in the semiconductor sector as demand for semiconductor chips has been “lukewarm.”
The last point is the heavier influence on the company’s performance today. Lighter demand for chips can often be a pre-indication of slowing demand for consumer electronics and everything else that has a semiconductor chip as a part.
This is currently one of the headwinds that the semiconductor industry is starting to face, something I’ll talk about in tomorrow’s Morning Buzz.
As for TSM shares chart, the stock is breaking a familiar trendline among the semiconductor stocks. TSM shares broke below their 50-day moving average today on heavier trading volume. The move is likely to add selling pressure to the stock, which also has significant price support at $130.
Taiwan Semiconductor stock’s long-term trend remains bullish with strong support at $105, which would be a further decline of 20% from today’s price.
A drop of 20% is not likely for TSM shares unless the broader market sees another 10-20% decline in the S&P 500 and Nasdaq 100.
Meta
Only two stocks from the “Magnificent Seven” are trading above their short-term trendlines, Meta (META) and Alphabet (GOOGL). Both stocks are showing resilient strength against the market, but META has been making some strong moves over the last three days.
Meta stock is trading 3% higher today as the stock threatens to break above its recent trading range with a move above $525 (about 4.5% above current prices).
Here’s the thing with META shares…
Last quarter, META blew analyst expectations out of the water with their earnings report. The company is now reaping the rewards of a tough year of cost-cutting and the refocusing of its business. As a result, the stock shot higher by more than 20% in just days.
Investors have very short memories. When it comes to a stock making moves the way META did last quarter, they don’t want to miss the next opportunity. For that reason, we’re very likely to see a “buy the rumor” rally ahead of Meta’s earnings announcement next Thursday.
From a technical perspective, A break above $525 sill trigger what I refer to as a “Volatility Rally,” as the stock will be breaking above an important volatility indicator.
That break would serve as the “last notice” for traders to get in the stock before earnings, which would instantly increase buying volume on the stock.
The chart shows an open path to a price of $600 on the back of the buy the rumor crowd and a healthy earnings report.
UnitedHealth Group
UnitedHealth Group (UNH) has had a horrible year. The company suffered a crippling cyber-attack in February, followed by the Government’s adjustment of Medicare reimbursements in March. All of which added up to the worst performance of all stocks in the S&P 500 as shares tumbled 20% in the first three months of the year.
Earlier this week, UNH released earnings results that were better than Wall Street expectations both on earnings per share (EPS) and revenue. Revenue grew 8% year-over-year, which is consistent with their competitors’ growth.
The earnings beat has some buyers moving back into UNH stock as we’ve seen a 13% rally in shares over the last four days.
Is that rally going to stick?
From a technical perspective – one that is always more important in these situations – the stock is running through what would normally be significant resistance at the sight of its 50-day moving average. That level currently sits at $490 with the stock trading at $495.
The next hurdle for the UNH bulls to jump comes in the form of double-barreled resistance at $505. This price combines the stock’s 200-day moving average with round-numbered resistance/support of $500.
I expect that the stock will start to see some profit-taking at this price, and if there is going to be a reversion back to the stock’s lows, it will happen in short order.
Also sitting at the $500 level is the 20-month moving average for UNH stock. This long-term trendline is the line between a long-term bull and bear market. Failure to close the month of April above this level will result in UNH shares falling into a long-term bear market trend.
