Lam Research Corp. (LRCX) may be outlining a double top formation on the charts and if we read this correctly it could mean that LRCX is vulnerable to a significant decline in the weeks ahead.
In this daily bar chart of LRCX, below, we can see a peak in early June followed by more than a $20 pullback and a subsequent rally to a slight new high. Prices are still above the rising 50-day moving average line as well as the rising 200-day moving average line. The daily On-Balance-Volume (OBV) line has followed prices higher the past 12 months. Since early June the OBV line has moved down and up with the price action. If the OBV line continues to weaken it will be a signal to us that sellers of LRCX are being more aggressive with heavier turnover on days when the stock closes lower.
The Moving Average Convergence Divergence (MACD) in the lower panel looks like it has started to narrow again towards a take profits sell signal as well as a bearish divergence when compared to prices.
In this daily candlestick chart of LRCX, below, we can see a large bearish engulfing pattern the first peak as well as the same pattern this Wednesday and Thursday. This chart also shows the potential double top in the OBV line as well as the narrowing MACD indicator.
In this updated weekly bar chart of LRCX, below, we can see a parabolic rise the past two years from near $60 to over $160. Prices are extended above the rising 40-week moving average line. The weekly OBV line has confirmed the advance and watching it going forward should tell us if sellers become more aggressive. The weekly MACD oscillator turned lower in June.
This Point and Figure chart of LRCX, below, shows the potential double-top pattern. There is potential support below the market but if it breaks we could have a significant risk going forward.
Bottom line: A close below the 50-day moving average line around $153 could make the longs become more aggressive sellers.