Despite a market cap of $111 billion, Texas Instruments still manages to fly under the radar for many investors. However, tech investors tend to look at its trends in business and monitor management's outlook because of the implications it may have on the rest of semiconductor space.
So you can imagine investors weren't feeling so hot after the company reported a top- and bottom-line miss, followed by a below-consensus outlook for both sales and earnings. Yikes.
Shares fell 7.5% to $118.95 in Wednesday trading, but closed off the session low at $115.87, as well as the extended hours low of $114.40.
For its part, the VanEck Semiconductor ETF (SMH) - Get Report was off its lows too, although shares were down about 1.75% on the day. Heavy hitters like Micron (MU) - Get Report , Advanced Micro Devices (AMD) - Get Report and Nvidia (NVDA) - Get Report were surprisingly near flat on the day after morning buyers stepped up to the plate.
To say the semi space is doing a pretty good job of shaking off the report is an understatement. Earlier on RealMoney, Jim Cramer made the case that Texas Instruments isn't the same bellwether that it once was, and the market's action is reflecting a similar mindset.
Trading Texas Instruments Stock
Texas Instruments stock was trending higher in a rising wedge (blue lines) before reporting earnings. Unfortunately for bulls, that wedge broke lower. On the plus side though, bulls have stepped up, bidding the stock off its lows.
The trading range from Wednesday creates a very interesting setup for TXN stock.
Just overhead, the stock faces its 100-day moving average, while its 78.6% retracement is at $122.68. Just below the session open is the 61.8% retracement at $115.20, followed by the rising 200-day moving average currently near $114.
That creates a very simple "go with" trade in Texas Instruments stock. That is, go with the flow. If bulls wrestle control of momentum, look for them to take shares north of the 100-day moving average. That puts the 78.6% retracement on the table. Above that and a move to the 50-day moving average at $126.60 is possible.
Bears can "go with" momentum too, if it's to the downside. A drop below the 61.8% retracement likely brings up a test of the 200-day. Below the 200-day and the 50% retracement near $110 is on the table.
Keep it simple: Above the 78.6% retracement is bullish and puts the 50-day on the table. Below the 200-day moving average is bearish and puts the 50% retracement on the table.
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This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.