Lam Research Plunges 5.90% Amid Bearish Technical Signals

Lam Research (LRCX) shares declined significantly by 5.90% during the latest trading session, closing at $140.35. This sharp move occurred on elevated volume, warranting closer technical examination within the context of the past year's price action.
Candlestick Theory
Recent candlestick patterns reveal notable bearish signals. The most recent session formed a large bearish engulfing candle, completely consuming the body of the preceding bullish candle from October 6th. This suggests a potential reversal of the short-term uptrend and strong selling pressure near the $150 psychological resistance level. Prior support around $142.79 (October 1st close) failed during this decline, establishing new resistance near $145-$147. Immediate support is observed near the $137.50-$139.50 zone, corresponding to a cluster of earlier highs and lows.
Moving Average Theory
Price action relative to key moving averages indicates a potential shift in momentum. The latest close at $140.35 breaches the mentally calculated 50-day Exponential Moving Average (EMA), estimated to be near $142-$145, turning this into new resistance. The price is now approaching the significant 100-day EMA (estimated near $137.50), which could provide intermediate-term support. The rising 200-day EMA (estimated near $105) confirms the primary long-term trend remains bullish, but the breach of the 50-day EMA suggests weakening near-term momentum. A sustained move below the 100-day EMA may signal further downside towards the 200-day EMA.
MACD & KDJ Indicators
The MACD indicator (12,26,9) is exhibiting a bearish crossover, with the MACD line crossing below its signal line into negative territory. The histogram shows increasing negative momentum following the recent drop. Concurrently, the KDJ oscillator suggests an oversold condition. The K-line is likely plunging towards 20, approaching levels associated with potential short-term exhaustion points for sellers. However, the strong negative MACD crossover implies bearish momentum dominance at present, even amid oversold KDJ readings.
Bollinger Bands
Volatility, as measured by Bollinger Bands (20 periods), saw a significant expansion during the sharp selloff. Price breached the lower Bollinger Band, which typically indicates either an acceleration of the downtrend or a potential exhaustion signal. Given the context of the preceding uptrend and the significant downside volume, this breach may represent a volatility capitulation event. A move back inside the bands is necessary to suggest stabilization. The breach underscores the bearish momentum but also highlights potential for a tactical rebound due to the overshoot.
Volume-Price Relationship
Volume analysis provides critical context. The 5.90% decline occurred on the highest trading volume (approximately 16.5 million shares) in the last 10 sessions, validating the strength of the bearish move. This high-volume breakdown suggests conviction among sellers and increases the likelihood of sustained downward pressure. Prior bullish advances, particularly on October 1st (6.64% gain), also occurred on high volume, indicating participation. However, subsequent follow-through upside attempts (e.g., October 2nd, 6th) occurred on lower volume, suggesting weakening bullish commitment leading into the recent breakdown.
Relative Strength Index (RSI)
The RSI (14-period) is calculated using the average gain and loss formula. Based on the price trajectory, the RSI is estimated to be around 37-40, moving down from a prior reading near 55-60. This places the indicator firmly out of overbought territory (>70) and approaching, but not yet in, the oversold zone (<30). This neutral-to-weak reading suggests the decline has room to continue before reaching levels historically associated with significant oversold bounces, though it lacks the strong bearish warning that might come with sustained sub-30 readings.
Fibonacci Retracement
Applying Fibonacci retracement to the significant swing low observed around $137.50 (likely identified between August lows near $75-80 and the recent October high near $149.36) provides key reference levels. The 38.2% retracement level resides near $137.50, aligning remarkably closely with the estimated 100-day EMA and forming a key confluence support zone. The 50% retracement level sits near $134.00. Holding above the 38.2% ($137.50) is crucial for bulls to maintain the medium-term uptrend structure. A breach opens the door towards the 50% ($134.00) and 61.8% ($130.50) levels.
Confluence and Divergence
A key technical confluence exists near $137.50, where the mentally tracked 100-day EMA, the 38.2% Fibonacci retracement, and prior significant price structure (highs from late September) align. This represents a critical support zone requiring close attention. The primary divergence noted is between momentum oscillators: the MACD's strong bearish crossover and negative momentum expansion conflict with the KDJ indicator's proximity to oversold territory. While MACD signals continued downside risk, the oversold KDJ suggests the potential for a near-term consolidation or rebound attempt near key supports like $137.50.