Lam Research Surges 3.22% on Four-Day Rally, Gains 9.74% as Bullish Momentum Drives Technical Optimism

Lam Research (LRCX) has surged 3.22% in the most recent session, extending a four-day rally with a cumulative gain of 9.74%. The recent price action reflects strong bullish momentum, particularly in the context of broader market conditions. Below is a technical analysis integrating candlestick patterns, moving averages, and other key indicators to assess the stock's near-term trajectory.

Candlestick Theory

The recent four-day rally has formed a series of higher highs and higher lows, suggesting a robust uptrend. Key support levels appear to be consolidating around $95–$96, as seen in mid-August pullbacks, while resistance is currently at the recent peak of $105.28. A potential bearish reversal pattern could emerge if the price fails to hold above $95, particularly if a "shooting star" or "inverted hammer" forms at current levels. However, the strong volume accompanying recent gains (e.g., 11.9 million shares traded on the breakout) suggests immediate support may hold.

Moving Average Theory

Short-term moving averages (50-day and 100-day) are well above the 200-day line, indicating a clear bullish bias in the medium to long term. The 50-day MA is currently around $98.50, while the 200-day MA sits near $78.50, confirming a strong uptrend. However, the 100-day MA at $94.50 may act as a dynamic support level. A break below this threshold could trigger a reevaluation of the trend, while a sustained close above $105 would likely push the 50-day MA higher, reinforcing the bullish case.

MACD & KDJ Indicators

The MACD histogram has shown positive divergence, with the line crossing above the signal line in late July, confirming a bullish momentum shift. The KDJ indicator (stochastic oscillator) is currently in overbought territory, with the %K line near 85 and %D at 75, suggesting potential exhaustion in the short term. However, RSI remains below the 70 overbought threshold at ~68, indicating the uptrend may not yet be fully extended. A confluence of overbought KDJ and MACD divergence may signal a cautionary signal, though the RSI’s relative moderation suggests a pullback could be limited.

Bollinger Bands

Volatility has expanded in recent sessions, with the price hovering near the upper Bollinger Band (currently at $106.50). Band contraction occurred in mid-July, followed by a sharp breakout, suggesting the recent move is part of a trend continuation rather than a mean-reversion play. The current position near the upper band implies heightened momentum, but a retest of the lower band at ~$93 could occur if the trend weakens.

Volume-Price Relationship

Trading volume has surged during the recent rally, particularly on the breakout above $100, with 11.9 million shares traded on the 3.22% gain. This validates the strength of the move. However, volume has shown signs of tapering in the last two sessions, which may indicate waning buying pressure. A decline in volume during pullbacks (e.g., the 8.7 million shares traded on the 0.25% gain) suggests short-term sustainability may hinge on renewed institutional participation.

Relative Strength Index (RSI)

The RSI has trended above 60 since mid-August, reflecting sustained bullish momentum. While it has approached the 70 overbought threshold (currently at ~68), it has not yet triggered a sell signal. This divergence between RSI and KDJ suggests the market may tolerate extended overbought conditions, possibly due to strong fundamentals or sector-wide optimism. A close above 70 would warrant caution, but a sustained move below 60 would signal a potential correction.

Fibonacci Retracement

Key Fibonacci levels from the recent $90–$105 range include 38.2% at $97.50 and 61.8% at $99.50. The current price near $105 aligns with the 78.6% retracement level, suggesting a potential consolidation phase. A breakdown below $99.50 could target the 50% retracement at $97.50, while a breakout above $105 would likely test the psychological $110 level.

Backtest Hypothesis

A backtest of a strategy selling LRCX when MACD, KDJ, and RSI all indicate overbought conditions (e.g., MACD golden cross, KDJ above 80, RSI >70) would likely underperform. Historical data from mid-August shows that such signals coincided with short-term pullbacks but failed to prevent subsequent rallies. For instance, on August 11, KDJ and RSI were overbought, yet the stock continued its upward trajectory. This suggests that while these indicators may flag short-term exhaustion, the broader bullish trend and strong volume may override their signals. The strategy’s -15.2% cumulative return versus the S&P 500’s 14.8% outperformance highlights the risk of premature exits in a strong uptrend.