Potential Recovery of Lam Research (LRCX) Following Sell Rating

A Fresh Take on Lam Research (LRCX): Navigating the Semiconductor Tide

Lam Research, a global leader in wafer fabrication equipment, plays an indispensable role in the tech world, its stock showing mixed fortunes this year. Despite an 18% dip over the past year, signs of recovery are evident.

Over the last 10 weeks, LRCX has been locked in a fierce battle between optimists and pessimists, with the latter having a slight edge. However, a peculiar pattern emerges within this competition – a "5-5" sequence, wherein five weeks of upsides are followed by five weeks of downturns, repeated over time.

What sets this common pattern apart in LRCX's case is the underlying sentiment. This sequence, when it flashes, predicts a whopping 61.9% success rate for subsequent upsides. Moreover, for the past year, occurrences of net negative 10-week sequences have been unusually rare.

The delayed response from bulls, following bearish-dominant streaks, could indicate pent-up demand, increasing the chances of a positive shift in LRCX's trajectory. In fact, over the past month, the stock has surged over 14%.

Looking ahead, if the positive pathway materializes, LRCX could potentially trade around $77 by May 9, and $79.47 by the end of the month. These estimates are based on historical trends tied to LRCX's responses to the 5-5 sequence.

Harnessing the Market's Current: Tackling LRCX Stock

Navigating the derivatives market to predict future prices isn't a straightforward task due to non-linearity and the system's open nature, making it prone to random events that can derail well-crafted theories.

Our Premium subscription, however, aids in leveling the playing field.

A crucial feature to familiarize yourself with is our Gamma Exposure screen. Essentially, gamma exposure quantifies the change in delta exposure for options based on shifts in the underlying price. In simpler terms, gamma determines the option market's current – some setups will either accelerate or slow down your trade as the underlying share price moves.

Low gamma exposure signifies a stable environment, with delta changing slowly, minimizing amplified movements and creating a natural cadence. High gamma exposure, on the other hand, is akin to strong currents, amplifying small movements in the share price and forcing rapid shifts in dealer hedging, thereby creating a feedback loop.

For options expiring May 30, gamma exposure varies across strike prices. Up to the $75 strike price, the current is relatively calm. Between $75 and $80, though, gamma buildup is elevated. If LRCX breaks into this range, the subsequent hedging behavior could potentially provide a notable boost.

Wrapping It Up

LRCX's recent bearish trading sequences are unusual given its performance history, hinting at a possible quick rise above the $79 mark over the next four weeks. As a result, I'm intrigued by the 76/79 bull call spread expiring May 30.

This strategy involves buying the $76 call and simultaneously selling the $79 call, for a net debit paid of $139. If LRCX rises above the $79 short strike price at expiration, the maximum reward equals $161, translating to a payout of nearly 116%.

The situation becomes even more intriguing when we consider the high-probability nature of this setup and the strengthening currents above the $75 strike price. As such, Lam Research deserves your attention throughout this month.

On the date of publication, Josh Enomoto did not hold positions in any securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view our Disclosure Policy here.

Additional Insights

Robust Demand for Semiconductor Manufacturing Equipment: Following strong fiscal Q3 2025 earnings, LRCX experienced a significant stock price increase, indicating solid demand for semiconductor manufacturing equipment.
Positive June Quarter Guidance: The company’s guidance for the June quarter suggests continued strong performance, driven by advancements in foundry/logic, NAND, and DRAM technologies.
Consensus Buy Rating and Price Target Adjustments: Analysts have a consensus Buy rating for LRCX, with a price target prediction of $363.08 for 2025. While some analysts like JPMorgan have reduced their price target to $95, they maintain an Overweight rating.
Technology Inflections and Semiconductor Capital Equipment Spending: The growth in advanced technologies such as foundry/logic, NAND layer upgrades, and DRAM transitions is expected to fuel demand for Lam Research’s equipment. Despite potential downturns in the second half of 2025 due to trade issues, the company’s operational efficiency and strategic position could help mitigate risks.
Trade Dynamics and Tariffs: Potential trade tensions could impact semiconductor demand and, by extension, the demand for LRCX’s products.
The intriguing bull call spread on Lam Research (LRCX) for May 30, priced at a net debit of $139, capitalizes on the promising prospects of technology advancements and the unusual lack of bearish sequences in LRCX's recent trading.
When framing investment strategies around LRCX, understanding the market's current, as determined by gamma exposure, is crucial to preparing for the possible navigational challenges.
Wholesale financing can be a potent instrument for startups aiming to capitalize on technology-driven opportunities, such as the booming semiconductor sector, potentially providing the necessary capital injection to force growth andMock competition.
The 5-5 sequence in LRCX's recent trading showcases the nanosecond-level fluctuations in the semiconductor market and hints at a potential break above the $79 mark over the following four weeks.