Taiwan Semiconductor - Traders Looking for a Bottom

Published on Thursday, 09 September 2010 01:12 Written by Danny Miller

New York, September 9th (TradersHuddle.com) - Shares of Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) ended the trading session higher by $0.02 or 0.21% from its previous close. Taiwan Semiconductor's price action in today's session formed what is considered to be a Hammer, where bears drove prices lower intraday. However, the strong finish indicates that bulls regained control forming a trend reversal.

Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) manufactures integrated circuits based on its proprietary designs. The Company offers a comprehensive set of integrated circuit fabrication processes to manufacture CMOS logic, mixed-mode, volatile and non-volatile memory and BiCMOS chips. Taiwan Semiconductor is an affiliate of Philips Electronics N.V.

Taiwan Semiconductor's stock has been trading in a well defined range with support at $9.32 and resistance at $10.6, this range is also being used by traders to plan their positions.

Traders wanting to establish a position in Taiwan Semiconductor or traders that are already holding the stock can use the hammer formation to their advantage, since the pattern signal a potential bullish trend reversal.

Hammers are important candlesticks as they mark bottoms and support levels. Further buying pressure, and preferably on expanding volume, is needed before acting, as heavy volume will serve to confirm the validity of the reversal.

In the case of Taiwan Semiconductor, traders who want to add to their positions or start a new position, need to watch for confirmation of the reversal. Below a Hammer illustration: