Trading Semiconductor Stocks as Warren Buffett Buys Taiwan Semi

Semiconductor stocks were seeing a surge in price on the morning of Nov. 15.

The better-than-expected PPI report helped add fuel to the recent rally in the overall stock market and tech stocks have been trading quite well lately — particularly semiconductor stocks.

In fact, we recently looked at a setup in Nvidia  (NVDA) – Get Free Report, as well as a setup in Advanced Micro Devices  (AMD) – Get Free Report, as both stocks have traded quite well lately.

However, the latest action in the space comes as Warren Buffett’s Berkshire Hathaway  (BRK.B) – Get Free Report  (BRK.A) – Get Free Report filed its Form 13F with the SEC.

It showed that Berkshire acquired more than 60 million shares in Taiwan Semiconductor  (TSM) – Get Free Report in the third quarter, spending more than $4 billion in the process.

With today’s 12% rally, that stake would be worth just a hair under $5 billion. That’s of course, if Buffett & Co. haven’t altered the position by adding more or taking some profits.

Trading Taiwan Semiconductor After Buffett’s Buy

Weekly chart of Taiwan Semi stock.

Chart courtesy of TrendSpider.com

Even amid a horrendous year where shares of Taiwan Semi suffered a peak-to-trough decline of 59%, the stock remains a titan within the space. Commanding a market cap of more than $400 billion, it’s not one to ignore if an investor is looking for exposure to semiconductor stocks.

With a valuation of just 12 times this year’s earnings — even after rallying 37.5% off the recent low — one can imagine why Buffett was enticed.

Chips Stocks Shows Signs of Life

I am rooting hard for the chip stocks. Not only are they leading indicators in the market, but they are fan-favorites among investors. When times are good, bulls can’t seem to get enough AMD, Nvidia and Taiwan Semi.

This rally is a reminder of just how much investors want to own these stocks, even when they are struggling.

As much as I want to see Taiwan Semi rally from here, it’s hard to ignore the significance of where it’s trading on the charts.

The $80 to $83 area includes the 200-week moving average and the 61.8% retracement of the current range. It also includes the very notable breakout area from 2020.

Aided by some news-related selling in the overall market, Taiwan Semi stock is fading a bit from this area.

On the downside, bulls would love to see the stock stay north of $74 and the 10-week moving average. That keeps the bulls in active control.

On the upside, a move over $84 and the 10-month moving average opens the door to the low-$90s and the 50-week moving average. Above that puts $100 in play. 

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