Thursday, January 27, 2011

LRCX Watch

The wafer-fab equipment company Lam Research Corp. (LRCX) announced a 13.6% upside earnings surprise after the close on Wednesday. The market responded with a price drop. The company issued guidance that suggested a bit of weakness.

(This is the third time today that I've written "earnings surprise ... price drop". What's with you people? You know who you are! The Cylon traders who actually control the markets!!)

phase pfeppstrend

(Thank you. I feel much better for that.)

LRCX remains in bull phase on the pfe/pps chart and has retraced about half of the day's maximum loss.

The price hit a swing high on Wednesday, the day before the earnings announcement, and a substantial swing low on Jan. 7

Reversal Levels
  • $54.29, +4.3% (swing high)
  • $52.04 --- You are here.
  • $50.55, -2.9% (20-day moving average)
  • $49.87, -4.2% (50-day moving average)
  • $46.27, -11.1% (swing low)

On the slow-trading chart, LRCX has been in neutral phase since April 2009. At present the pfe is just below the +50 line. A tip above that would swing the stock into bull phase long-term.

Monthly chart
phase pfeppstrend

LRCX moved to bull phase on 55-day/20-day price channel chart, with a $53.15 breakout level. By the rules, the stop/loss at this point is $53.56, and the stock is trading below that level. So by the book, it is back in neutral phase.

If I were to ignore that signal, then the next benchmark would be a requirement that the stock not close below the breakout level today and Friday. It seems almost certain to close below breakout today.

When I opened the trade, I wrote: "Given the strong upward bias to the price this week and the unflagging tendency to surprise on earnings days, I'm willing to set aside my reservations, but with a cautious vow to exit quickly if the price response doesn't materialize, or to exit before the announcement."

Vows are worth keeping, often.

Given the lack of momentum on the slow-trading chart, and the move to neutrality on the price-channel chart, I'm inclined to close my position on LRCX.

Table Abbreviations:
  • pfe - Location of the polarized fractal efficiency line.
  • pps - Person's Proprietary Signal mode.
  • trend - Trend of the polarized fractal efficiency line.

Key to the PPS/PFE tables
phase bull phase
bear phase
pfe +100 and above
+50 to below 100
0 to below +50
below 0 to above -50
-50 to above -100
below -100
pps bull confirmation
bear confirmation
trend uptrend
no trend

More on the PFE/PPS analysis

Read a detailed explanation of the analytical tools and how they’re used, including trading rules.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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