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TSM Short Trade Setup & Entry

TSM (Taiwan Semiconductor), the second largest semiconductor company behind INTC, offers an objective short entry here on the backtest of the recently broken primary bull market uptrend line. T2 (16.84) is the current final target with a suggested stop on a close above 24.50. 10-year weekly chart:

TSM weekly Nov 12th

TSM weekly Nov 12th

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Nov 12, 2015 10:48am|Categories: Completed Trades - Short|Tags: |2 Comments

2 Comments

  1. Shambo November 12, 2015 11:29 am at 11:29 am

    Randy – thinking about stops and minimizing drawdowns. I took this TSM trade, I’m already fairly short the Qs, SPX, LABU, SOXL. I wanted to comment/ask about stops. You give a fairly wide stop, but often I feel like, if I’m watching the market all day anyway, that its more comfortable to use a five or 15 min chart for entry and use a tighter stop ( 22.73 in this case, above the recent high of the day), and then focus on 15 min, 60 min, daily charts as the position unfolds, or if I get stopped out today, re-evaluate with a good chance of getting short again at a higher price.

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    • rsotc November 12, 2015 11:47 am at 11:47 am

      Very important to realize that if I only provide one suggested stop on a trade, that stop is calculated based on the final (i.e.- highest (if long) or lowest (if short) price target for that trade. I will sometimes provide multiple suggested stops on trades with multiple price targets and very often state that my preference is to use a R/R of at least 3:1. This means that if targeting one of the more shallow targets, the stop used should be proportionally smaller that the maximum suggested stop which is based on the final target.
      To add to that, those are only SUGGESTED stops. Every trader & investor has different trading styles, risk tolerances and stop allowances/rules (or at least they should).
      The setups that I share here can be played in many ways, hence the reason that I typically list multiple price targets. More active traders, for example those spending a lot of time in the 60-minute & other intraday charts might opt to only shoot for the first price target or even better, determine their own price targets, assuming they agree with the basis for the trade setup that I provided in the first place.
      Finally, on your comments above regarding the positions that you have, make sure to read the comments that I just posted on the CVS trade idea regarding sector/industry diversification. If the Q’s rip higher from here for whatever reason, it will almost certainly drag the semis (SOXL) and biotechs (LABU) right along with them as those are some of the top sectors within the $NDX. Personally I’m short all of those (except SPX) as well but I factor in the overlap/correlation between them into my position sizing & total exposure to tech & biotech.

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