TSMC and ASML kick off chip earnings season — ride the pre-report momentum

Verdict: One Confirmation Away — Wait for the Entry to Fire

The thesis is well-chosen but not yet actionable: this is an event-driven long on TSM (with ASML as context) ahead of chip earnings, and neither leg's entry conditions are live today. The strongest support is fundamental — TSM's last reported year showed revenue up 33.9% to $2.89T with net income up 36.0%, ASML's fiscal 2025 revenue rose 15.6% to $32.7B with free cash flow up 21.8%, and TSM's June 30, 2026 ownership filing shows net open-market insider buying of roughly $370K ahead of the very event this trade targets. The strongest argument against is the trade's own evidence: the 60-month backtest won only 45.7% of 258 trades with a 17.4% maximum drawdown, the ASML half was never actually traded in the test, and parameter-sensitivity evaluation exceeded its budget, so no robust nearby-parameter setup was established for the 2.4% stop and 4.8% target. Right now TSM has price above its $418.18 EMA but an ADX of 13.1 versus the required level above 20, while ASML has an ADX of 34.4 but trades $18.55 below its $1,726.55 EMA — each is one condition short. Wait for a daily close where the traded symbol clears both conditions; that confirmation, not conviction in the AI narrative, is what justifies entry.

Trade now: waiting on the trend filter, not the thesis

Neither leg of this long setup is live today. For TSM, the price condition is met — the last close of $426.38 sits $8.19 above the 20-day EMA at $418.18 — but the trend-strength filter is not: the 14-day ADX reads 13.1 versus the required level above 20, a gap of about 6.9 points. For ASML, it is the mirror image: the 14-day ADX at 34.4 easily clears the threshold, but the last close of $1,708 is $18.55 below the 20-day EMA at $1,726.55, so that condition is near but not met. "Wait" here means no position until both conditions on the traded symbol close in the green on the same day — check the daily close, not the intraday print. If triggered, the risk framework is explicit: a position stop of 2.4% against a take-profit of 4.8%, roughly 2-to-1 reward-to-risk, with no single position above 25% of the book. TSM's nearest first-level resistance sits at $429.90, only about 0.8% above the last close, so a fresh long there would likely hand profits back quickly on an exit-at-resistance rule; the fixed 4.8% target is the more meaningful objective. Note the strategy's underlying premise — entering ahead of earnings and exiting the day after or on a 5% drop — remains part of the idea, but the executable rules today are the ADX/EMA entry plus these exits. The evidence here is a completed backtest, not a live track record: over 60 months on TSM the strategy traded 258 times for a 20.9% total return with a 45.7% win rate and a 17.4% maximum drawdown; the 24- and 12-month windows returned 18.8% and 6.6% respectively. Exits were filled on daily bars rather than intraday, so treat those figures as coarse. One caveat that matters for sizing: parameter-sensitivity evaluation exceeded its time budget, so no robust nearby-parameter setup was established — the published thresholds are what they are, and there is no optimized variant to fall back on. Bottom line: the setup is one confirmation away on each name. If TSM's ADX climbs through 20 while price holds above the EMA, or ASML reclaims its 20-day EMA with trend strength already in place, the entry fires at the next daily close. Until then, the correct action is to watch, not buy.

Earnings-season momentum in the two stocks that anchor AI capex — and a trade history that actually paid for it

The thesis — that the world's key AI chip suppliers lift into their earnings prints, and investors can ride that pre-report optimism — sits on unusually strong fundamental footing. TSMC's latest full year (period ended December 31, 2024) showed revenue of $2.89T NT dollars-equivalent scale, up 33.9% year over year, with net income up 36.0% and free cash flow nearly tripling to about $870B NT — a 197.9% jump. Gross margin expanded to 56.1% and operating margin to 45.7%, the latter placing TSMC at the 98.7th percentile among 736 Information Technology peers. ASML, the reporting-week co-star, posted fiscal 2025 revenue of $32.7B, up 15.6%, with net income up 26.9% to $9.6B and free cash flow up 21.8% to $11.1B — the 99.9th percentile for free cash flow among 534 Industrials peers. These are not struggling companies hoping for an AI bump; they are the companies collecting the AI bump already. The idea's direction is also confirmed by behavior, not just narrative. TSM's disclosure for the period ended June 30, 2026 shows net open-market insider buying of roughly $370,000 — insiders putting their own money in ahead of the very earnings event the idea targets. ASML shows continued balance-sheet improvement into its report too: debt-to-equity fell 30.6% year over year to 0.14, gross margin rose to 52.8%, and return on equity climbed to 49.0%. If the thesis is that these names enter earnings from positions of strength, the numbers say they do. Crucially, this is a backtested setup, and the completed test supports the momentum claim. On the daily timeframe over 60 months, the strategy on TSM executed 258 trades and returned 20.9% with a 45.7% win rate, evaluated across 1,237 bars. The shorter windows corroborate rather than contradict: 18.8% over the trailing 24 months (108 trades) and 6.6% over the trailing 12 months (52 trades). The equity curve shows the strategy weathering the 2022 semiconductor drawdown and then compounding sharply through the late-2025-to-early-2026 rally, where it reached its best stretch. An event-anchored long bias in these two names has, historically, been paid. The structural backdrop the Investor's…

Scores

• Conviction score breakdown: 61
• Thesis support: 82
• Trade readiness: 38
• Risk quality: 55
• Backtest evidence: 48
• Fundamentals trend: 80

Watch items

• TSM — ADX (14)
• TSM — Price vs EMA (20)
• ASML — Price vs EMA (20)
• ASML — ADX (14)
• TSM — Next earnings release
• TSM — Net insider open-market buying
• TSM — Quarterly ex-dividend date
• ASML — Next interim ex-dividend date
• ASML — ADX (14) above 20
• ASML — Price above EMA (20)
• TSM — ADX (14) above 20
• TSM — Price above EMA (20)