TSMC Surges 4.96% on Bullish Technical Signals and 61.54% Backtest Win Rate, Eyes $320 Target

TSMC (TSM) Technical Analysis

TSMC has surged 3.49% in the latest session, extending a two-day rally of 4.96%. The price action reflects a bullish momentum, supported by key technical indicators and volume dynamics.

Candlestick Theory

The recent price action forms a Bullish Engulfing pattern on 2025-10-06, with a large bullish body engulfing the prior bearish candle. This suggests strong institutional buying and a potential reversal from consolidation. Key support levels emerge at $270–273 (previous intraday lows on 2025-09-26–2025-09-29) and $250–253 (August 2025 range), while resistance is near $302–307 (current highs). A break above $307 could target $320, aligning with the 23.6% Fibonacci retracement level from the 2024-12-31 low to the 2025-04-09 high.

Moving Average Theory

The 50-day MA (currently ~$275) and 200-day MA (~$225) are trending upward, with the 50-day above the 200-day, confirming a bullish bias. The 100-day MA (~$260) acts as a dynamic support. Short-term traders may monitor the 50-day MA for a potential pullback, but the broader trend remains intact.

MACD & KDJ Indicators

The MACD histogram has turned positive, with the line crossing above the signal line, indicating strengthening momentum. The KDJ oscillator (stochastic) shows the stock entering overbought territory (K=80, D=75), suggesting a possible near-term correction. However, the divergence between overbought conditions and rising prices implies strong demand, potentially delaying a pullback.

Bollinger Bands

The price is near the upper Bollinger Band, reflecting high volatility. The bands have been widening since late September, signaling a breakout phase. A retest of the upper band could confirm its role as a dynamic resistance, while a move below the 20-day MA (~$290) might trigger a consolidation phase.

Volume-Price Relationship

Trading volume has spiked to ~15.8 million shares on 2025-10-06, validating the recent price surge. However, volume has been declining in recent sessions despite rising prices, indicating weakening conviction. A sustained increase in volume during an upward move would strengthen the bullish case.

Relative Strength Index (RSI)

The 14-day RSI stands at 68, approaching overbought territory (>70). While this suggests a potential short-term retracement, the RSI remains within a bullish channel, reflecting a strong uptrend. A break above 70 could extend the rally, but traders should remain cautious of a false break.

Fibonacci Retracement

Key Fibonacci levels from the 2024-12-31 low ($192) to the 2025-04-09 high ($158.75) include:

- 38.2%: $250–255

- 50%: $260–265

- 61.8%: $270–275

The current price near $302 aligns with the 23.6% retracement level, suggesting a potential continuation of the bullish trend if buyers hold above $270.

Backtest Hypothesis

The backtest of TSMC’s Bullish Engulfing signals from 2022 to 2025 reveals a 61.54% win rate over 30 days, with an average return of 4.30%. Notably, the maximum return of 10.89% occurred on day 58, aligning with the stock’s exposure to AI-driven demand and geopolitical tailwinds. The recent Bullish Engulfing on 2025-10-06 (closing at $302.4) fits this pattern, supported by AMD/OpenAI partnerships and U.S. chip production initiatives. However, risks include Samsung’s 2nm AI chip competition and U.S.-China semiconductor tensions.

Confluence and Divergences

The Bullish Engulfing pattern aligns with overbought RSI and MACD momentum, but diverging volume trends and KDJ overbought conditions caution against overreliance on short-term gains. Traders should balance the bullish case with risk management, targeting $320 as a long-term objective while monitoring $270 as a critical support level.