Lam Research (LRCX) Gains 4.68% in Three-Day 10.21% Rally as Technical Indicators Signal Strong Momentum

Lam Research (LRCX) has surged 4.68% in the most recent session, marking a three-day rally of 10.21%. This sharp move suggests strong short-term buying momentum, with the stock trading near its 52-week high. The technical analysis below evaluates key indicators to assess the sustainability of this rally and potential reversal points.

Candlestick Theory

The recent price action forms a bullish engulfing pattern, with the final three candles showing progressively higher highs and lows. Key support levels are identified at $131.37 (October 10 low) and $128.13 (September 25 low), while resistance clusters around $145.22 (October 15 high). A breakdown below $131.37 could trigger a retest of the $126.37 (September 26 low) level, while a breakout above $145.22 may target the $149.15 (October 6 high) resistance.

Moving Average Theory

The 50-day MA ($133.45) and 100-day MA ($130.65) are currently below the 200-day MA ($126.70), indicating a bullish crossover. The price sits above all three MAs, reinforcing an uptrend. A cross above the 200-day MA would signal a stronger long-term bullish bias.

MACD & KDJ Indicators

The MACD histogram has turned positive, with the line crossing above the signal line, suggesting accelerating momentum. The KDJ oscillator (Stochastic) shows overbought conditions (K=82, D=78), aligning with the RSI reading of 68. However, the divergence between the MACD and KDJ implies caution—while momentum is strong, overbought levels may precede a pullback.

Bollinger Bands

Volatility has expanded, with the price near the upper Bollinger Band ($145.22). This suggests a potential overbought condition, but the bands’ width indicates sustained bullish pressure. A reversion to the 20-day moving average ($140.35) could offer a short-term support zone.

Volume-Price Relationship

Trading volume has surged in the past three sessions, peaking at 18.75 million shares on October 10. The high volume during the recent rally validates the strength of the move, but a drop in volume during consolidation could signal weakening momentum.

Relative Strength Index (RSI)

The 14-day RSI stands at 68, approaching overbought territory (70). While this suggests potential exhaustion in the short-term rally, the RSI’s trajectory above 50 indicates the uptrend remains intact. A close below 50 would signal a shift in momentum.

Fibonacci Retracement

Key Fibonacci levels derived from the recent $131.37–$145.22 range include 61.8% at $137.81 and 38.2% at $133.31. These levels act as dynamic support zones. A breakdown below $133.31 could trigger a test of the 23.6% retracement at $130.95.

Backtest Hypothesis

The backtest strategy of buying LRCX when RSI exceeds 70 and holding for 5 days from 2022 to 2025 yielded a 17.60% return versus the NASDAQ Composite’s 45.31% benchmark. The strategy’s Sharpe ratio of 0.26 and max drawdown of 0% highlight poor risk-adjusted returns. This underperformance aligns with LRCX’s AI-driven fundamentals and sustained sector leadership, where technical signals like RSI overbought conditions failed to capture momentum. Investors should prioritize fundamental catalysts (e.g., CSBG growth, AI adoption) over short-term technical triggers.