Texas Instruments Incorporated Stock: Bracing for a Sell-Off
The equity markets are under duress, and the selling pressure is caused by the uncertainties with regards to the U.S. election and the looming Federal Reserve interest rate hike.
Uncertainty is always a catalyst that can send even the best-performing names like Texas Instruments Incorporated (NASDAQ:TXN) stock into a tailspin. Under such circumstances, I shoot first then ask questions later. Meaning, I lighten up on my positions in hopes of avoiding further losses.
In times of duress and uncertainty, it is always wise to batten down the hatches and see where the pieces may fall. Having cash on hand, reducing leverage is instrumental in surviving hostile trading environments. This also gives the ability to acquire positions if an opportunity does present itself.
Texas Instruments stock chart is still bullish but, if selling is the order of the day, then lower levels will prevail and the price support will be tested. Testing these levels successfully would only reaffirm the bullish trend in TXN stock.
The following Texas Instruments stock chart illustrates the first levels of support.
Chart courtesy of StockCharts.com
There are two levels of support on the TXN stock chart above that I am highlighting. These price levels will act as primary levels of support if the turmoil in the equity markets continues.
The first level of support is defined using a horizontal trend line. This trend line is created by connecting the peaks on the price chart that occurred in 2015 and 2016. This price level served as resistance over that time frame and, in May 2016, this level was finally breached to the upside. When a level of resistance is broken, it becomes a level of support, and it is common for the price to return and test this level from above.
The second level of support is defined by using an uptrend line. This trend line is created by connecting the troughs on the TXN stock chart. This trend has served to define the entire bull market run in Texas Instruments stock since shares bottomed after the financial crisis in 2009. This is a prime example of a bullish trend that starts in the lower left and moves to the upper right.
This trend line has been tested numerous times and, every time, buyers came in to support the price of TXN stock. If this trend line were to ever break, it would signal that a bear market has begun and that lower levels will undoubtedly prevail.
The following short-term Texas Instruments stock chart illustrates the level that I will be watching, which will signal that the lower levels of support I identified will be tested.
Chart courtesy of StockCharts.com
Since late July, TXN stock has been trading within a defined range. Support stands at $65.80 and resistance stands at $71.80. This range spans approximately $6.00. A breach of these levels will dictate the direction of the next move but, under these market conditions, I am focusing on the lower level of support. If there is a breach of $65.80, sell-off will ensue. This would set the wheels in motion to test the lower levels of support that I outlined as primary levels.
A close below $65.80 would target a level that is similar in length to the trading range. A drop of approximately $6.00 would target the $59.80 price point which coincides with the horizontal level of support, and is slightly above support defined by the uptrend line. All the levels of support are converging around a similar range, and I expect the price support for Texas Instruments stock to hold around these levels.
The Bottom Line on TXN Stock
Economic and political uncertainty is causing bearish headwinds for Texas Instruments stock and, as a result, I would act to reduce risk and raise cash. If TXN stock closes below $65.80, it will likely test lower levels of support. These levels of support are all within the confines of a larger bullish trend, and could present an opportunity.