Texas Instruments Stock Trades Lower on Weak Guidance

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Texas Instruments Stock Trades Lower on Weak Guidance

Texas Instruments Incorporated (TXN) beat earnings per share (EPS) after the market closed on Oct. 22, but missed sales targets and provided dismal outlook. After reaching an all-time intraday high of $132.20 on Oct. 15, the stock was trading between its semiannual pivot of $127.62 and its quarterly hazardous threshold of $132.51. On Oct. 23, Texas Instruments gapped below $127.62 and almost challenged its 200-day simple moving average of $115.06.

The stock finished last week at $120.51, up 27.5% year to date and 37.4% above its low of $87.70 on December 26. The stock is presently 8.8% lower than its all-time intraday high of $132.20, which was established on Oct. 15. According to Macrotrends, Texas Instruments has a neutral fundamental profile, with a P/E ratio of 22.47 and a dividend yield of 2.60%. For the 17th straight quarter, the stock has outperformed or equaled earnings per share projections.

Texas Instruments seems to feel that the semiconductor industry’s recovery has been postponed until 2020. According to the corporation, analog sales declined 8% year on year, while embedded processor applications fell 19%. Later in the week, the Philadelphia Semiconductor Index (SOX) reached an all-time intraday high on Friday, Oct. 25.

The daily chart for Texas Instruments

Refinitiv XENITH

Texas Instruments’ daily chart reveals that the stock has been trading above a “golden cross” since March 25, when the 50-day simple moving average crossed above the 200-day simple moving average, indicating that higher prices are on the way. A positive “key reversal” happened when the stock traded to its Dec. 26 low of $87.70 and closed that day at $97.98, which was above its Dec. 24 high of $90.55. The yearly value level of $96.08 was the staging level for a purchasing opportunity between January 8 and January 23.

  Trade in Value Added (TiVA) Definition

My proprietary algorithms were fed a closing of $114.76 on June 28th, and the semiannual pivot at $127.62 failed to hold after the last earnings release. Since July 24, this level had become a magnet. The September 30 close of $129.24 was also included into my analytics, and its fourth quarter danger level of $132.51 could not be reached at the October 15 high of $132.20.

The weekly chart for Texas Instruments

Refinitiv XENITH

Last week’s weekly chart for Texas Instruments was bearish, with the stock trading below its five-week modified moving average of $125.82. At $90.79, the stock is far above its 200-week simple moving average, or “reversion to the mean.” Last week, the 12 x 3 x 3 weekly slow stochastic reading fell to 77.91, dropping below the overbought level of 80.00.

Trading strategy: Buy Texas Instruments shares if they fall below the 200-day simple moving average of $115.06, and sell them if they rise over the semiannual pivot of $127.62.

How to apply my risky and value levels: The latest nine monthly, quarterly, semiannual, and annual closing are used to calculate value and risk levels. The first set of levels was determined by the closing on December 31, 2018. The initial yearly level is still in effect. The conclusion of the fiscal year in June 2019 created new semiannual levels. The semiannual level is still in effect for the second half of 2019. The quarterly level shifts at each quarter’s conclusion, therefore the closing on September 30 set the level for the fourth quarter. Because monthly levels vary at the end of each month, the closing on September 30 created the monthly level for October.

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My hypothesis is that nine years of volatility between closing is sufficient to infer that the stock has factored in all probable bullish and negative occurrences. Investors should purchase shares on weakness to a value level and sell shares on strength to a risky level to capture share price volatility. A pivot is a value or danger level that has been breached within its time period. Pivots operate as magnets that are likely to be tried again before their time horizon ends.

The author has no holdings in any of the stocks mentioned and has no intentions to start new positions in the next 72 hours.

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