Taiwan Semiconductor’s (NYSE: TSM) weekly upward trend is firmly in place. An analysis of the daily Elliott Wave structure reveals the upcoming target and a potential short-term correction.
TSM’s upward momentum started at the April 2025 low of $134, progressing through a sequence of waves: Wave ((1)) reached $248, Wave ((2)) retraced to $223, Wave ((3)) climbed to $311, and Wave ((4)) found support at $266. Subsequently, Wave ((5)) achieved new highs. Though the rally might continue within Wave ((5)), it’s dependent on maintaining above $266. Should this be sustained, prices may reach the $321–$338 range, signalling the end of the larger Wave III rally.
Upon completing Wave III, TSM will undergo a daily Wave IV correction, featuring a 3, 7, or 11-swing pattern. This phase offers a buying opportunity against the $134 low before the bullish trend resumes. Therefore, market participants should look for entry points after these corrective swings. Employing strategies like the Elliott Wave and proprietary systems can help identify high-probability zones for capturing future upward movements.
The rally that began from the $134 low back in April 2025 appears to be in its final stages. Positive momentum from the Q3 earnings call and recent updates on the 1.4-nanometer process node have fueled this climb. We are now watching the $321 to $338 price zone as the most likely area for this current wave to peak.
For traders anticipating one last push higher, buying near-term call options expiring in January or February 2026 could be a viable strategy. Targeting strikes around $325 or $330 offers a way to leverage a final surge into that target zone. However, we must be mindful that implied volatility is elevated, making these options more costly than they were weeks ago.
As the stock enters that target area, we should pivot to strategies that profit from the expected daily correction. Buying put options offers a direct way to gain from a price drop once the upward momentum clearly stalls. Alternatively, selling out-of-the-money call credit spreads would be a more conservative way to bet on the price failing to move beyond the $340 level.
This view is supported by recent market data, with Wall Street consensus firming up around a $330 price target for early 2026. We have also seen implied volatility for at-the-money January 2026 options rise above 45%, signaling that the market is bracing for a significant move. This pattern is reminiscent of the price action in late 2023, which was followed by a 15% pullback before the next major rally began.
The coming pullback is considered a strategic buying opportunity for the next major leg up. Once the correction finds a bottom, we will look to establish new bullish positions using longer-dated call options, such as those expiring in September 2026. This allows us to re-enter at a lower cost basis to ride the next major wave toward new all-time highs.
