With Lam Research, Proceed With Caution
Let's go over the charts and indicators to see why.
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Shares of semiconductor manufacturer Lam Research Corp LRCX were raised to a fundamental buy recommendation Friday at B. Riley with a price target of $1,100.
Sometimes you see buy recommendations come early and sometimes they come late. In this instance with LRCX I think traders should be cautious and not look to be buyers of this company.
Let me show you what I mean with some charts and indicators.
In this daily bar chart of LRCX, below, I can see that prices have broken below both the cresting 50-day moving average line and below the March lows. This is not a positive development. Trading volume has increased on the recent decline in price and that tells us that traders are voting with their feet.
The On-Balance-Volume (OBV) line shows weakness since early March as traders shift from aggressive buyers to aggressive sellers.
The Moving Average Convergence Divergence (MACD) oscillator turned lower in early March and is now just slightly above the zero line and perhaps just a few trading days away from an outright sell signal.
In this weekly Japanese candlestick chart of LRCX, below, I can see a number of upper shadows on the candles in the past six weeks. Traders are rejecting the highs in the $1,000 area. Prices are trading above the rising 40-week moving average line but this is a lagging indicator.
The OBV line has turned lower and the MACD oscillator has crossed to the downside for a take profit sell signal.
In this daily Point and Figure chart of LRCX, below, I can see that prices have reached and exceeded a price target in the $906 area.
In this weekly Point and Figure chart of LRCX, below, I can see a potential downside price objective in the $781 area.
Bottom line strategy: There are a lot of bright and talented fundamental analysts working on Wall Street, but this buy recommendation of LRCX looks ill-timed to me.
I would avoid the long side of LRCX as further declines look possible in the weeks and months ahead.
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