Taiwan - Mean Reversion Opportunity
The Taiwan Stock Exchange Index (TWSE) is down almost 10% since its peak on 4/27/21. The index is unique as the technology sector accounts for 58% of the total index weighting, and if we drill down further, semiconductors account for 40% of the total weighting. The well-documented chip shortage has been weighing on semiconductor stocks of late, and it appears that the selling pressure has reached a short-term inflection point.
On Thursday, the percentage of members registering a 4-week low spiked to 79.09%.
Let's lower the threshold and assess the forward return outlook when the percentage of 4-week lows cross above 75%.
HISTORICAL CHART
HOW THE SIGNALS PERFORMED
The short to intermediate-term results look good, especially the 1-week timeframe. Usually, I would wait for the downside momentum to subside, but in this case, the short-term numbers would argue otherwise.