Lam Research's 14-Day Winning Streak Drives 36.25% Surge as Technical Indicators Signal Strong Uptrend Amid Risks

Lam Research (LRCX) has surged 4.16% on the most recent session, extending its winning streak to 14 consecutive days with a cumulative gain of 36.25%. This robust rally suggests strong bullish momentum, but technical indicators must be analyzed to assess sustainability and potential risks. Below is a structured evaluation using key methodologies.

Candlestick Theory

The recent price action exhibits a series of higher highs and higher lows, forming a textbook bullish trend. Key support levels appear at $115–$120, where the stock previously found buying interest during pullbacks in August and early September. Resistance is clustered near $130–$135, aligning with the recent high of $132.20. Notable candlestick patterns include long-bodied bullish candles with minimal wicks, indicating strong conviction in the uptrend. However, short-term overbought conditions may trigger consolidation or a pullback to test these support levels.

Moving Average Theory

The 50-day moving average (DMA) currently sits at ~$115, while the 100-DMA is around $110 and the 200-DMA near $100. LRCX has surged above all three, suggesting a strong medium-term uptrend. The 50-DMA crossing above the 100-DMA in late August confirmed a golden cross, reinforcing the bullish bias. However, the 200-DMA remains a critical psychological level; a retest below this threshold could signal a shift in momentum.

MACD & KDJ Indicators

The MACD histogram has expanded positively over the past two weeks, reflecting growing bullish momentum. The MACD line (12-day EMA minus 26-day EMA) is well above the signal line, indicating a strong trend. Conversely, the stochastic oscillator (KDJ) shows %K and %D lines in overbought territory (>80), suggesting potential short-term exhaustion. While this may hint at a near-term correction, the alignment with the MACD suggests the uptrend could persist if volume remains robust.

Bollinger Bands

Volatility has spiked recently, with the upper Bollinger Band expanding to ~$135. The stock is currently near the upper band, indicating stretched conditions. A break above this level could extend the rally, while a retest of the lower band (~$115) would validate the trend’s strength. The narrow band contraction observed in late August preceded this breakout, suggesting the current expansion is part of a continuation phase.

Volume-Price Relationship

Trading volume has surged alongside the price advance, peaking at ~25 million shares on the 14th of September. This validates the rally’s strength and indicates institutional participation. However, volume has slightly tapered in recent sessions, which may signal a potential pause in buying pressure. A divergence between volume and price could foreshadow a reversal, but for now, the correlation remains supportive of the uptrend.

Relative Strength Index (RSI)

The RSI has entered overbought territory (>70), reflecting the aggressive 14-day rally. While this typically signals caution, the absence of bearish divergence (price highs > RSI highs) suggests the trend may continue. A close below 60 could trigger profit-taking, but a sustained move above 70 would reinforce the bullish case.

Fibonacci Retracement

Drawing retracement levels from the recent high of $132.20 to the August low of $90.49 identifies key psychological levels. The 38.2% retracement at ~$115 and 50% level at ~$112 have acted as support in prior corrections. A break below $110 (61.8% retracement) would raise concerns about trend sustainability.

Backtest Hypothesis

The backtest strategy of buying LRCX when RSI exceeded 70 and selling when it fell below 70 yielded poor results: a -5.15% CAGR, -17.58% total return, and a Sharpe ratio of -0.35. This highlights the limitations of using RSI alone in a strong trending environment, where overbought conditions often persist without reversal. Integrating confluence with other indicators—such as confirming with moving average crossovers or Bollinger Band breakouts—could improve the strategy. For example, entering long positions when RSI >70 coincides with a golden cross and price above the upper Bollinger Band might align with the stock’s structural momentum, reducing false signals.