Texas Instruments (NYSE:TXN) — Semiconductors are Texas Instruments’ biggest business as a percentage of revenue (roughly 90%). While the major semiconductor indices display weak looking weekly charts, the daily charts show some potential for upside. The same goes for TXN.
After a big rally off the 2009 lows, the stock hit a peak in March and has been correcting ever since. The weekly chart shows a wide trading band of support roughly between $22.50 and $27. Last week, the stock bounced near the middle of that range, which however still leaves it vulnerable to test the lower end near $22.50.
On the daily chart, the stock has formed a bearish looking triangle. Note that the 50-day simple moving average is near $28.55 and, as such, quite far away from the current stock price. In any sort of mean-reversion move the stock should move up to that level.
A daily close out and above the triangle (around $27) could quickly lift the stock up to its 50-day simple moving average or beyond. In that case, initial stops could be placed around $25.50. However, remember that these are volatile markets we find ourselves in at the moment, and swings both ways can be violent and quick. The risk to this trade is that TXN falls out of the bear triangle for a retest of the $22.50 area.