Monday, December 24, 2012

Lam Research (LRCX) consolidates under long-term channel resistance

DEC24 1424EST. Lam Research Corporation (LRCX) has been consolidating for the past fortnight underneath the resistance trendline of a well-defined, two-year price channel, shown below in dashed red. Such consolidation is sometimes the precursor of a bullish advance.

Lam Research (LRCX). Sept 2010 to Dec 2012. Daily candles.

The upper line of the two-year channel happens to currently coincide with the 200-day simple moving average (SMA), shown above in dashed light-blue. Below the price graph in the above screenshot is an oscillator that measures the difference between price and the 200-day SMA. As the viewer can see, the oscillator is currently hugging the zero level, after having recently bounced lower from that level. Such reaction away from a resistance level followed by consolidation is sometimes a precursor to to a bullish break above resistance.

In other words, the behavior of the oscillator (which in turn measures the relationship between price and the 200-day SMA) confirms the expectation that LRCX *may* be poised for a bullish advance. Caveat emptor: until Lam Research breaks decisively above the resistance trendline / 200-day SMA on relatively high volume and holds at those elevated prices, the bullish trader might be advised to wait.

Lam Research, a NASDAQ-100 component, is a supplier to the semiconductor industry.