We discussed the technical position of Lam Research Corp (LRCX) earlier this month, and we gave bullish and bearish parameters for guidance: "With prices in the middle of the $140-$170 trading range, we are not out of the woods yet. Obviously a close above $170 would be bullish and a close below $140 would be bearish."
Prices are softer this morning, and it is looking like LRCX is making its third rally failure, but an alternate bullish pattern is also possible. Let's discuss Plan A and Plan B.
In this daily bar chart of LRCX, above, we can see that prices are above the flat 50-day moving average line. Prices are still above the rising 200-day moving average line, which intersects at $130 now.
The daily On-Balance-Volume (OBV) line has been stalled since early June, and suggests that buying and selling pressures are in balance for now. Because the OBV line can lead the price action, I am on alert for the OBV line breaking out on the upside ahead of the price action.
The Moving Average Convergence Divergence (MACD) oscillator in the lower panel shows a lower high in July when prices made a higher high, which is a bearish divergence. Recently, the MACD oscillator turned positive again, just above the zero line.
An alternative view of the price action suggests an ascending triangle pattern, with roughly equal highs around $170 and higher lows at $140 and then $150. A strong close above $170 on heavy volume would mark the breakout from this triangle.
In this weekly chart of LRCX, above, we have mixed signals. Prices are above the rising 40-week moving average line, so the math says we are in an uptrend. The weekly OBV line has been stalled for the past three months, suggesting that prices have risen enough to find that buyers and sellers of LRCX are in balance with no strong trend of aggressive buying or selling. The MACD oscillator continues to point lower from its June peak and take-profits sell signal.
In this Point and Figure chart of LRCX, above, we have used a dynamic scaling to the price reversals. This chart shows that LRCX met and exceeded a $110 price target. The chart also shows that a trade up at $171.78 would be a fresh breakout and a decline to $143.15 would be a bearish breakdown.
Bottom line: Whether LRCX is a small triple top or a bullish triangle we don't know yet, but if the pattern is a triangle we should see a breakout soon, as breakouts from triangles tend to occur two-thirds to three-quarters of the way through the pattern.