The Sky Is the Limit for Texas Instruments Stock

Texas Instruments Stock
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TXN Stock: No Overhead Resistance to Contain the Stock Price from Advancing

Texas Instruments Incorporated (NASDAQ:TXN) stock is currently trading at a new all-time high. New all-time highs carry a number of implications, and these implications are magnified the longer it takes to finally breach the previous all-time high.

In this case, Texas Instruments stock finally took out its previous all-time high that was set in the mania that burst the dotcom bubble in 2000. This means it took TXN stock 17 years to return to this level and break above it, so it’s fairly safe to say that the implications are significant.

The following stock chart illustrates the length of time and the work that was necessary to create this new all-time high.

Texas Instruments stock chart

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Chart courtesy of StockCharts.com

The previous all-time that is highlighted on this TXN stock chart was identified by using the high that was set in 2000 amid the panic buying that created and burst the dotcom bubble. The road that followed wasn’t so pleasant.

The stock was in the throes of a bear market where Texas Instruments stock fell from a peak of $77.99 to a low of $10.27, representing a loss of 86.83% before the stock price was finally able to find its footing.

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The trading action that followed was lackluster and directionless. After the share price bottomed in 2002, a rally ensued, but any attempts at higher prices were thwarted in the depths of the financial crisis, which caused TXN stock to retest the lows that were forged in 2002.

The rally that began in 2009 is where all the fun returned to this investment. The move towards higher prices has been both constructive and supported by a very influential momentum indicator.

The following Texas Instruments stock chart illustrates the constructive price action and the influential momentum indicator that has supported this move, which, in turn, created this new all-time high.

TXN price chart

Chart courtesy of StockCharts.com

The price action on this TXN stock chart contains the quintessential characteristic that defines all bullish trends, which is a series of higher highs and higher lows.

The bullish trend has been constructive in nature. Constructive price action consists of impulse waves and consolidation waves working together in an alternating wave structure to create and sustain a trend.

The impulse waves, highlighted in green, capture the stage in a bullish trend where all the gains are created.

The consolidation waves, highlighted in purple, capture the stage in a bullish trend in which overbought conditions are alleviated in order to set the stage for a new impulse wave to develop.

The influential momentum indicator I was referring to is located in the lower panel of the chart, labeled “MACD.” MACD, which stand for moving average convergence/divergence, captures a change in momentum by using the crossings of a signal-line. Depending on whether this indication is in bearish or bullish alignment, it has been instrumental in suggesting whether an impulse wave or consolidation wave was in development.

The bullish MACD cross that was generated in May has correctly implied that an impulse wave was in development. This indication remains in bullish alignment, which backs up the notion that an impulse wave is still in development, supporting the notion of higher stock prices.

These indications were instrumental in reinforcing the new all-time high that was recently created, which on its own carries significant implications.

When a new all-time high is created, it creates a dynamic with which there is no overhead resistance to contain the price from advancing. It also simultaneously creates an environment where all bearish investors holding short positions are underwater on their position. As the stock price continues to appreciate, their need to cover that position continues to grow. This need to cover has a tendency to fuel the advance that follows.

Even though this potential advance has no real limit, the trading action from 2000 until now can be used to project a potential price objective. This is accomplished by taking the depth of the trading action and extrapolating that value above the previous all-time high, which creates a price objective of $145.00 for Texas Instrument stock.

Analyst Take: 

Texas Instruments stock has broken above a previous all-time high that was created 17 years ago. Accomplishing this feat carries significant implications, suggesting that much higher stock prices are now on the horizon. The price action that preceded this feat was constructive, and the indications supporting this advance remain in bullish alignment, which reinforces the notion of higher TXN stock prices.