Neutral Short Term Pattern on Taiwan Semiconductor

Published on Wednesday, 18 July 2012 04:24 Written by TradersHuddle Wire

New York, July 18th (TradersHuddle.com) - Shares of Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) closed the trading day higher by $0.02 or 0.16% from its previous close. Taiwan Semiconductor's price action formed what is considered to be a doji close, where the open and close prices are very close to each other, mainly signaling an indecision between buyers and sellers.

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 trading range is defined by a trough, which marked calculated support at $12.74 and by a peak that set the resistance point at $14.44. These levels are closely watched by traders managing their positions.

Traders wanting to establish a position in Taiwan Semiconductor or traders that are already holding the stock can use the doji close to their advantage, since the pattern present a short-term pause in the stock's price action. This pause results in an entry point for traders depending of which way the stock resolves this short-term indecision.

The Doji is an important candlestick pattern that provides information on their own and as components in a number of important patterns. Doji form when a security's open and close are virtually equal. The length of the upper and lower shadows can vary and the resulting candlestick looks like a cross, inverted cross or plus sign. Alone, doji are neutral patterns.

Any bullish or bearish bias is based on preceding price action and future confirmation. In the case of Taiwan Semiconductor, given that the stock finished the session higher, bulls should monitor their positions for confirmation that the stock will continue higher by taking its intraday high. Below a Doji illustration: