Shares of Texas Instruments (TXN) closed at fresh 2016 highs on Monday. This was the eighth straight higher low for the semiconductor giant, a run that has carried Texas Instruments stock more than 9% higher. As last week came to a close, the stock moved past the early-2016 peak set back in July. On Monday, Texas Instruments extended the rally even further and has now left behind a very important base.
On July 26, Texas Instruments stock exploded to the upside with the help of a huge earnings-inspired breakout gap. The stock finished the day with a 7.85% gain on its heaviest upside trade of the year. This powerful move stretched the stock's post-Brexit gain to 24%, but there would be no more upside. Texas Instruments reached complete exhaustion that day, and for the next 14 weeks a near-picture-perfect consolidation was built.
Six weeks after Texas Instruments' blowout second-quarter report, the July 27 breakout gap was filled. That level, just above $66, marked the low of the consolidation. The stock remained above this key level at both the October and November lows as the sideways action remained in a tight range. Now that an upside resolution has taken place over the last two sessions, a big move is a possibility.
In the near term, Texas Instruments investors should take advantage of any weakness. The stock now has a very solid support zone in place between $72.60 and $71. This key area includes the July and October highs. A drift back to this zone would provide a low-risk buying opportunity for patient bulls.
On the downside, a close back below last week's low of $69.65 would be a clear sign that more choppy action is ahead before a new rally leg can take hold.