Our last review of semiconductor maker Lam Research (LRCX) was on December 22 when we wrote that "Traders should be still long LRCX from our October 19 recommendation. Raise stops to $615. Look for new highs soon."
Prices stalled and then dove sharply lower in January and would have stopped out longs. Let's check out the charts again.
In this updated daily bar chart of LRCX, below, we can see that the 50-day moving average line is about to cross below the 200-day line for a bearish dead or death cross sell signal. The daily On-Balance-Volume (OBV) line has been in a decline from the middle of January telling us that sellers of LRCX are more aggressive.
The 12-day price momentum study in the bottom panel shows a higher low from February to March even though prices have made a lower low. This difference between the price action and the indicator is a bullish divergence and it is an imprecise forecaster of a possible trading low.
In this weekly Japanese candlestick chart of LRCX, below, we see a mixed to bearish picture. Prices are trading below the declining 40-week moving average line. The weekly candles show some lower shadows but it does not look like it is convincing traders to turn bullish. The OBV line is down from its January peak.
The Moving Average Convergence Divergence (MACD) oscillator made a lower high when price made a higher high in December/January. This is a bearish divergence and the oscillator is about to cross below the zero line for an outright sell signal.
In this daily Point and Figure chart of LRCX, below, we can see that the software is projecting a downside price target in the $481 area.
In this weekly Point and Figure chart of LRCX, below, we can see that the $326 area is a potential longer-term downside price target.
Bottom line strategy: While the pace of the decline in LRCX has slowed, the trend is still down and we find a lack of reasons to go long. Avoid the long side of LRCX.
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