Viewers of Jim Cramer's popular Mad Money program on CNBC get to call in and ask Jim about individual stocks in his fast-paced "Lightning Round." Wednesday night Cramer was asked about Applied Materials (AMAT) and he replied: "I prefer Lam Research Corp. (LRCX) . I think they have more upside."
I am clueless about the fundamentals of these companies but let's check out the charts of LRCX.
In the daily bar chart of Action Alerts PLUS holding LRCX, below, we can see a "V" bottom with prices declining significantly over seven months to a late December nadir followed a four-month rally to regain the prior peak. LRCX is above the rising 50-day moving average line after three successful tests in March and May. The 200-day line is rising and in early March we can see a bullish golden cross with the 50-day average crossing above the 200-day line.
The daily On-Balance-Volume (OBV) line shows a rise from January telling us that buyers of LRCX have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator has turned down from positive territory for a take profits sell signal.
In the weekly bar chart of LRCX, below, we can see an impressive rally from the middle of 2016 to early 2018 where the share price of LRCX nearly tripled before a 75% correction. Prices hit bottom in December and quickly rebounded to close above the now rising 40-week moving average line.
The weekly OBV line broke its decline and the MACD moved back above the zero line for an outright go long signal. The MACD oscillator has narrowed in recent weeks but it may not result in a crossover if the rally continues.
In this Point and Figure chart of LRCX, below, we can see the impressive rally of this year. The charting software is projecting a downside price target around $182 but the volume by price data shows significant support below the market. A rally to $201.41 will probably turn this chart bullish.
Bottom-line strategy: Reviewing our three favorite charts of LRCX we find that the impressive rally this year is likely to continue. Risk a close below $185 for traders. Investors with existing longs should consider risking a close below $175.