Price Action Investing is all about capturing the moment when the market changes its perception PE about a business. It’s all about getting that inflection point when things turnaround pretty dramatically. Let me explain this with one case study.
Case Study: Taiwan Semiconductor Manufacturing TSM
Oil OUT and Semiconductor IN
You cannot be bullish on digitization without being bullish on Semiconductor. There are many leading companies of the world that designs chips but when it comes to manufacturing, TSM is the Global leader and the most important company when it comes to the Semiconductor supply chain. TSM is a “pure play” foundry. It only operates on a contract basis and doesn’t sell devices of its own design. The things started to change in Sep 2019 and I tweeted about it back then.
The Big Story today:
Apple +2.35% on expected higher upgrades
Why? – 5G
Semiconductor space Bullish
Taiwan Semiconductor Manufacturing TSM on verge of a breakout, thanks to strong order flows from Apple/AMD— Deepak Singh (@smarket) September 30, 2019
The Breakout happened
TSM stock broke out to a new high and everybody took notice. The stock making a new high is the buying opportunity.
The best way to play the next upgrade cycle of smartphone: Taiwan Semiconductor Manufacturing TSM pic.twitter.com/DqhVfTs1Wi
— Deepak Singh (@smarket) October 8, 2019
The Business grew and everyone recognized
The stock doubled in Value
Taiwan Semiconductor has a 53% market share. It makes chips for everyone be it Apple, NVidia, AMD
It just came out with earnings and the quarterly sales up 23%.This company has been the backbone of digitization. Its turning point came last October.
The stock now at $90 https://t.co/8PDRhLSZWK pic.twitter.com/v3EHKFbC1i— Deepak Singh (@smarket) October 8, 2020
The Business momentum and price momentum continues
Everything is not a Bubble
I follow Price Action because nothing captures an inflection point like this. The biggest story of 2019:
Semiconductor replacing Oil
Taiwan Semiconductor now top 20 most valuable list
What moved out of that list?
Exxon Mobil https://t.co/8PDRhLSZWK— Deepak Singh (@smarket) December 18, 2020
Price Action Analysis [The US stock market]
Fundamentals don’t drive stock prices.
How people perceive those fundamentals drive stock prices.
As a market participant/trader, keep an eye on how the market views the fundamentals than being obsessed with your own version of fundamentals. It means look at the price action and it tells you without bias what the market thinks about the stock. Once you read the price action, go and find the reason why the market has such a view on the stock, and be aligned with it.
This is the level one mind training every individual requires to be in sync with market thinking. This is the real fundamental of Investing. I call it Science of Stock Price Action
If price action fascinates you and you invest in the US stock market – then price2action.com is a great place to start.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers