Technical analysis on PEP and TSM
By Antreas Themistokleous
26 September 2023
Here’s a fundamental and technical look at two attractive stock trading options this week.
PepsiCo, Inc. (PEP) share price declined by around 6% in the third quarter of the month. The company’s earnings report for the fiscal quarter, ending September 2023, is expected to be released on Tuesday 10 October, before market open. The consensus EPS is $2.18 (USD), up from $1.97 in the same quarter last year.
As of 30 June, 2023, the company’s financials are not looking great, with the current ratio being at just 89%. This means that the company has no ability to repay its short-term liabilities with the assets currently in possession.
Also, long-term debt makes up around 46% of the total liabilities of the company, meaning that the company is mostly operating on debt rather than income-generated funds. On the other, hand the dividend yield is above 2.60%, making the share of the beverage giant relatively attractive to long-term investors.
Technical analysis shows that the price is trading at a rather interesting 78.6% of the weekly Fibonacci retracement near the lower Bollinger band. Both of these technical indicators could act as a support on the price and cause some minor correction to the upside in the short term.
If this scenario plays out, then it is possible to see some resistance around the $180 area, which is made up of the psychological resistance of the round number, the previous high of late August. It is also just above the 61.8% of the weekly Fibonacci retracement.
Taiwan Semiconductor Manufacturing Company
Shares of Taiwan Semiconductor Manufacturing Company Limited (TSM) have incurred losses of around 17% through the last quarter. The company’s earnings report for the fiscal quarter ending September 2023 is expected to be released on Thursday 12 October. The consensus EPS is $1.15, against $1.79 of the same quarter last year.
Despite the recent decline in the share price, the company has an enviable financial image with a 15% decrease year over year of its long term debt. The total assets outweigh the total liabilities at a ratio of almost 3:1.
The trailing annual dividend yield is at 13.43%, while the payout ratio is just above 30%. This means that long-term investors get a decent return on their shares, while the company is keeping the majority of its income (70%) to invest in expansion and growth.
From a technical analysis perspective, the price broke below the recent triangle formation in early September and is currently trading below the moving averages and the bearish trendline. The combination of the oversold Stochastic oscillator as well as the lower Bollinger band, acting as a support, might give way to some correction to the upside in the short term.
If this turns out to be true, then the first point of resistance might be seen around the $88 price area, which is the inside resistance of mid May. The second point of resistance, around $92 price area, consists of the 61.8% of the weekly Fibonacci retracement level and the 50-day moving average.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Antreas Themistokleous is a trading specialist in Exness. He is a Certified Financial Technician since 2018. As a member of the Society of Technical Analysts, Antreas is implementing advanced use of indicators and patterns to conclude in an action plan for different trading strategies.
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