Despite a choppy ride, Taiwan Semiconductor (NYSE:TSM) is setting itself up in a new base. The stock has been volatile this year, something unusual for a company with a market capitalization that tops $120 billion. Despite that, Taiwan Semiconductor generally has held above its most recent buy point at 22.84.

Since late January, shares have traded basically between 22.50 and 25 as they shape a flat base. The next buy point would be at 25.25.

The stock made modest progress from its most recent breakouts, in June, November and January. But other breakouts have been far more successful, such as an August 2012 move that resulted in a 32% gain over six months.

Taiwan Semiconductor is the leading chip industry foundry. It is a supplier to many of the world's leading technology companies. It makes chips for smartphone manufacturers, for instance.

That gives Taiwan Semiconductor a large block of business, but also some risks.

Some analysts have downgraded the stock, warning that its sales of chips for smartphones might lag forecasts as demand for mobile devices softens. Pacific Crest Securities in March downgraded the stock to underperform from sector perform, saying some of its top customers suffer from bulging inventories.

The company will report first-quarter results April 16. Analysts expect earnings of 47 cents a share, an increase of 52% from the year-ago period, according to a survey by Thomson Reuters.

Sales are pegged at $7.07 billion, an increase of 45%.

The stock has a middling Relative Price Strength Rating of 74, but its other ratings are strong enough to give it a best-possible Composite Rating of 99.

IBD's semiconductor manufacturing industry group was ranked second out of 197 groups as of Thursday's edition.

By: DocMemory
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