They said dynamic random access memory (DRAM) chip makers and flat panel display producers are likely to become the focus of the next wave of foreign buying.
However, the market may face a strong technical resistance ahead of the 240-day moving average around 6,000 points as investors tend to take profits while waiting for another rally.
The weighted index is expected to fluctuate between 5,850 points and 6,000 points this week.
For the week ending November 4, the index closed up 278.77 points or 4.95 percent at 5,911.74, after a 1.84 percent fall in the previous week.
The daily average turnover stood at 75.96 billion Taiwan dollars (2.25 billion US), following an average 65.98 billion dollars a week earlier.
"Foreign investors served as a driving force behind the rally this week," said Huang Hsun-hui, an analyst with Capital Securities.
"I expect they will continue to take advantage of the cheap local market after previous heavy losses."
Huang said inexpensive DRAM and flat panel display stocks are attractive while the world's largest wafer foundry Taiwan Semiconductor Manufacturing Co remains spotlighted due to its strong international competitive edge.
A dealer with another local brokerage agreed, saying bargain hunting retail investors had returned to the trading floor.
"An increase in the average daily turnover this week is paving the path for additional gains in the upcoming week with investor confidence restored to some extent," the dealer said.