TSM Collapse, Dead Ahead ?

Sell-Off, Has Been Orderly … So Far

Taiwan Semi (TSM) is the largest cap in the Emerging Markets, EEM (ETF) Index.

As we’ll see from a technical standpoint, TSM’s posted a massive bearish divergence.

That divergence is now being confirmed with price action breaking lower.

As shown below, price action’s launch from a low of 5.83, in November 2008, to a high of 145.00, on January 13th, this year, has been stratospheric; over 2,595%.

However, for about eleven months, the last part of that action was sideways. Then, a Wyckoff up-thrust during the middle of January and reversal lower.

That’s where we are now.

Taiwan Semi (TSM) Weekly Chart

Highlighting the divergence.

The problem or the benefit (depending on long/short), such reversals take much longer to play-out, than anyone expects.

Moving closer in, on the weekly.

At this juncture, TSM’s following a trendline lower that’s declining at approximately – 95%, annualized.

Volume for the week increased from the week prior, which increased from the week before that, also increasing from the week before.

Downward pressure continues; TSM’s down -30%, from its all-time highs.

Emerging Markets, EEM

When looking at the weekly chart of EEM, we can see the downward effect of TSM on this index.

Drilling down into the daily chart of leveraged inverse fund EDZ and compressing the vertical scale, one gets a sense for the potential of this move.

EDZ Daily (vert. scale compressed)

As a courtesy, entry dates, prices and current stop are listed (not advice, not a recommendation).

TSM & EEM, (EDZ-22-01) Targets

Coming up in another update, more specific (Fibonacci) targets for potential exit of the EEM short via EDZ.

At this juncture, an obvious (capital preservation) exit would be decisive penetration of the trendline shown or hitting the current stop; not advice, not a recommendation.

Summary

One of the hardest things to do for amateur and professional alike, is nothing.

That may be where we are with TSM, EEM and EDZ. The short position has been opened; stops and trend identified.

Now, the waiting.

As Livermore said nearly a century ago, it’s the waiting (not the thinking) that made him the money.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

The Danger Point®, trade mark: No. 6,505,279

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