LRCX Stock: Gaining Perspective
A lot of hype continues to surround semiconductor stocks, and as a result, hot money continues to flow into this sector. I am ecstatic to report my findings regarding Lam Research Corporation (NASDAQ:LRCX) stock because the picture it has painted on the price chart is superbly bullish. It illustrates that analyzing a stock, like LRCX stock, is as easy as using the right tools to gain a proper perspective, one that is generated using multiple time frames and applicable technical indicators.
If you’re looking for an opinion that is based on balance sheets, income statements, and cash flows, then you have come to the wrong place. My views and opinions are based on technical analysis. Technical analysis is based on the notion that historical price and volume data can be used to discern trends and forecast future prices. This method is popular among traders, and I have been using it to formulate trading strategies for close to two decades.
That being said, I have yet to come across a single indicator that is the end-all of all indicators and acts like a holy grail. I have found that there is always an exception to every rule, and the best way to formulate a proper perspective is to base it on multiple indicators, over multiple time frames. When a consensus is reached, a trading view is born.
The following monthly Lam Research stock chart illustrates the bullish price action that is supported by a momentum indicator.
Chart courtesy of StockCharts.com
The bullish trend on the chart above is an excellent example of constructive price action. Constructive price action consists of impulse waves that advance price, and consolidation waves that serve to unwind overbought conditions and set up the next advancing impulse wave. Long-term trends can sustain themselves by alternating between these waves.
The moving average convergence/divergence (MACD) indicator in the lower panel has had a good track record of confirming the type of wave that is in development. MACD is a simple trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.
In March 2013, a bullish cross was generated, indicating that bullish momentum was propelling LRCX stock, and that the path of least resistance was geared towards higher prices. Lam Research stock ran from the low $30.00s to mid $80.00s within an impulse wave that was effectively confirmed by the MACD indicator.
When a bearish MACD cross was generated in June 2015, it served to confirm that a consolidation wave was in development, indicating that bearish momentum had overwhelmed any bullish momentum. LRCX shares proceeded to trade within a sideways trading range.
In June 2016, a bullish cross was generated, indicating that once again bullish momentum was propelling LRCX stock and that an impulse wave was in development. This bullish signal is still engaged, which suggests that an impulse wave is still in development, supporting the notion of higher prices.
Using a long-term perspective, like a monthly scale, can smooth a noisy stock chart and produce indicators that are easy to discern.
The following Lam Research stock chart illustrates indicators that were generated using a daily scale.
Chart courtesy of StockCharts.com
In April 2016, a golden cross was generated. A golden cross is a bullish indicator that is generated when the faster 50-day simple moving average (highlighted in blue) crosses above the slower 200-day simple moving average (highlighted in red). This indicator is popular among the trading community because it is used to confirm that a bull market is in development. It is not uncommon for price to accelerate in the direction suggested by this indicator, and as a result, I find it wise to base my trading strategies in the direction suggested by this indicator.
A few short months after the golden cross was generated, a bullish trend began to develop. This trend of higher highs and higher lows is the quintessential characteristic of a bullish trend. Under most circumstances, a bullish trend can be best defined using a simple trend line, but in June, the price began to use the 50-day moving average as a level of support. This coincided with the bullish cross that was generated on the monthly stock chart.
The 50-day moving average has been tested on numerous occasions and buyers continue to step in and use this level to acquire shares. This moving average now defines the bullish advance in Lam research stock, As long as LRCX is trading above the 50-day moving average and the indicators remain in bullish alignment, I can only assume that higher stock prices will prevail, and therefore a bullish view is warranted.
Bottom Line on LRCX Stock
I am bullish on Lam Research stock because there are indications, over multiple time frames, that suggest a bullish view is warranted. I will continue to hold this bullish view until there are indications on the LRCX stock chart that suggest another view is warranted.