DailyPlay – Opening Trade (TSM) – July 10, 2024

TSM Bullish Opening Trade Signal

Investment Rationale

There are very few AI-related semiconductor stocks that are trading at reasonable valuations that we can justify buying at their current levels. However, TSM is positioned for continued growth due to the semiconductor industry’s reliance on TSM’s foundries and remains attractively valued with substantial upside potential. 

Technical Analysis

TSM recently made a new all-time high and broke out above a double top at $184 on higher-than-average volume, signaling strong bullish momentum. The stock has also shown impressive relative strength, consistently outperforming the overall market. And momentum recently turned positive again, supporting the case for a continuation of the bullish trend. 

TSM – Daily

Fundamental Analysis

From a valuation perspective, TSM trades at a very reasonable 21x forward earnings. This is especially attractive given the company’s strong growth metrics, with expected EPS growth of 23% and revenue growth of 22%, both significantly higher than the average S&P 500 company. Additionally, TSM boasts industry leading net margins of 38%, indicating efficient operations and profitability.

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 2 Contracts August 23rd $185/$170 Put Verticals @ $6.32 Credit per Contract.

Total Risk: This trade has a max risk of $1,736 (2 Contracts x $868) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $868 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is in a strong bullish trend.

1M/6M Trends: Bullish/Bullish

Relative Strength: 10/10

OptionsPlay Score: 96

Stop Loss: @ $12.64 Debit (100% loss to the value of premium)

View TSM Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

PLEASE NOTE that these prices are based on Tuesday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

View TSM Trade