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How a Simple Price Pattern Foretold a New "Tech Boom"

Taiwan Semiconductor's U.S. traded shares more than tripled in value since this forecast

by Bob Stokes
Updated: January 08, 2019

Just like no road map or navigation system is 100% reliable, neither is any analytical method. Still, some methods are simpler and more effective than others. One method that has proved its usefulness over the years are the classic chart patterns such as Elliott waves.

Let's focus on one specific Elliott wave chart pattern: the contracting triangle.

Let me show you how Mark Galasiewski, one of the editors of our Global Market Perspective, pointed out this pattern on a price chart back in February 2011, and then we'll discuss what happened afterwards.

First, here's that chart from nearly eight years ago, along with Mark's comments:

TechBoom2011

Taiwan Semiconductor Manufacturing Co. has broken out of its 10-year-long contracting triangle. Wave E of the triangle was shorter than we expected, so we will consider the triangle to be truncated. Truncations are rare, but for now we will take the triangle pattern at face value, because the vertical move of the past two months is consistent with the behavior of a fifth-wave thrust [higher].

The upward pointing arrow on the chart indicates Mark's forecast for higher prices.

The just-published January 2019 Global Market Perspective shows an updated chart, with an arrow pointing to when Mark made his 2011 prediction. Once again, here's Mark's commentary:

1901AFF_TSM-edited

Taiwan Semi is the dominant player by far in the contract chip manufacturing industry... When the stock broke out of a large-degree contracting triangle pattern in early 2011, we said it meant that a new, technology-driven boom had probably begun.

Since Mark's 2011 forecast, Taiwan Semiconductor's U.S. traded shares have advanced a whopping 233% (through Jan. 4, 2019).

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