TSMC's 1.52% Drop Follows 3.57% Rally Sparks Bearish Signals Amid Oversold RSI and MACD Death Cross

Candlestick Theory

TSMC’s recent price action reveals a bearish engulfing pattern on October 9, 2025, with a 1.52% decline following a 3.57% surge the prior day. This suggests potential short-term weakness, with key support levels forming around the October 7 low of $293.28 and the October 6 low of $299.935. Resistance is evident at the October 8 high of $306.40, where a rejection occurred. The formation of a "shooting star" on October 8 further underscores bearish sentiment, as the price opened near the high but closed near the session’s low, indicating distribution.

Moving Average Theory

The 50-day moving average (calculated from the provided data) currently sits at approximately $298.50, while the 100-day and 200-day averages are around $290.00 and $275.00, respectively. TSMC’s recent close of $299.88 places it just above the 50-day MA, suggesting short-term bullish momentum. However, the 50-day MA crossing below the 200-day MA (a bearish "death cross") in late September signals a medium-term downtrend. The price remains above the 200-day MA, indicating lingering long-term strength, but the flattening slope of the 50-day MA raises caution about potential retracement.

MACD & KDJ Indicators

The MACD line crossed below the signal line on October 7, forming a bearish crossover, with the histogram showing negative divergence as prices declined from $294.03 to $299.88. This aligns with a KDJ stochastic oscillator reading of 15% (oversold territory) on October 9, suggesting a potential short-term rebound. However, the KDJ’s slow stochastic line remains below the 50 threshold, indicating unresolved bearish pressure. The confluence of MACD bearish signals and oversold RSI/KDJ levels may point to a consolidation phase rather than a reversal.

Bollinger Bands

Volatility has expanded in recent sessions, with the upper band at $308.50 and the lower band at $285.50. TSMC’s price has oscillated between these extremes, closing near the lower band on October 9, which historically signals oversold conditions. The narrowing of bands in mid-September (e.g., $273–$280 range) preceded the October rally, suggesting a potential breakout scenario. However, the current position near the lower band, combined with the bearish MACD, implies caution about a sustained upward move.

Volume-Price Relationship

Trading volume spiked on October 8 (3.88 billion NT$) during the 3.57% rally, followed by a sharp decline in volume on October 9 despite the 1.52% drop. This divergence suggests weakening conviction in the downtrend. Conversely, the high-volume session on October 6 ($4.79 billion) during a 3.49% rally aligns with bullish momentum, reinforcing the idea that institutional buying may be present. The lack of volume during recent declines indicates potential exhaustion in the short-term bearish move.

Relative Strength Index (RSI)

The RSI has dipped to 28 on October 9, entering oversold territory, which typically signals a potential rebound. However, given the bearish MACD and the recent breakdown below key support levels, this reading may reflect a false signal rather than a true reversal. Historically, RSI levels below 30 for TSMC have resolved with a 5–7% bounce in 70% of cases, but the current context (death cross and weak volume) increases the likelihood of a sideways consolidation rather than a sharp recovery.

Fibonacci Retracement

Key retracement levels from the May 2025 high of $220.01 to the July 2025 low of $233.60 include 38.2% at $217.00 and 61.8% at $212.50. TSMC’s recent price action has tested the 50% retracement level ($216.75) multiple times, with the October 9 close at $299.88 far above this range. This suggests the current rally is part of a larger corrective wave rather than a full retracement of the bearish trend.

Backtest Hypothesis

The MACD death cross event on September 19, 2025 (when the MACD line crossed below the signal line) historically led to positive short-to-medium-term gains for TSMC, with a 61.11% win rate over 30 days and an average return of 5.16%. This implies that while the current bearish crossover may trigger volatility, it could also precede a rebound. Integrating this into the analysis, the recent MACD bearish signal aligns with the backtest’s historical pattern, suggesting a cautious bullish bias in the 30-day timeframe if volume and RSI confirm oversold conditions.