The global financial markets have been rocked in recent months thanks to increased volatility from U.S.-China trade talk. While the equity markets in most jurisdictions have struggled to move higher, one market that could be worth a closer look is Taiwan. As you’ll see in the charts below, the well-defined chart patterns are creating clear risk/reward setups that are pointing to higher prices for the remainder of 2019 and likely into 2020.
iShares MSCI Taiwan ETF (EWT)
Country-specific exchange-traded funds such as the iShares MSCI Taiwan ETF (EWT) are usually the go-to tool for active traders who want to get a sense for where the overall market for a specific country is headed. As you can see from the chart below, the price is trading within a long-term ascending triangle pattern, which suggests that traders will be watching for a break beyond the resistance near $36. The bounce off of its 200-day moving average is a clear indication that the bulls are in control of the long-term momentum, and the recent bullish crossover between the moving average convergence divergence (MACD) and its signal line will likely be used as confirmation of a move higher. Given the setup of the triangle, active traders will likely set their 12-month target prices near $42, which is equal to the entry point near $36 plus the height of the pattern.
Taiwan Semiconductor Manufacturing Company Limited (TSM)
Another triangle that will likely capture the attention of active traders is forming on the chart of Taiwan Semiconductor Manufacturing Company Limited (TSM). As you can see below, the pattern has been forming since early summer and is now approaching the breakout point near $44.52. Based on this pattern, technical traders will likely set their buy-stop orders above the aforementioned resistance and set their short-term targets near $52.50, which is equal to the entry point plus the height of the pattern. Stop-loss orders will most likely be placed below the support of the 200-day moving average in case of a sudden shift in the fundamentals.
Hon Hai Precision Industry Company (HNHPF)
Another electronic components company that is based in Taiwan that is worth a closer look based on its chart pattern is Hon Hai Precision Industry Company (HNHPF). As you can see from the chart below, the price has experienced a lot of volatility in 2019, but the tight range between defined support and resistance suggest that the price is about to experience another sharp move. In this case, we’d expect traders to watch for the bias to be to the upside and for the price to rise above the combined resistance of the 200-day moving average and descending trendline. A close above $4.88 will likely act as a catalyst for a sharp move higher, and traders will most likely look to protect their positions by placing stop-losses below $4.60 in case of a shift in the fundamentals.
The Bottom Line
Most of the financial markets around the world have struggled to move higher in recent months, but the outlier seems to be Taiwan, which based on the patterns discussed above, will likely capture the attention of active traders for months to come.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.