LRCX (Lam Research Corp)

LRCX operates in the semiconductor equipment group which has seen a lot of demand lately. It's difficult to understand all the technology that goes into their systems, but it is clear that the company has been winning business and growing earnings quickly. The group is also trading very well which should act as a tail wind for the stock.

I got involved after the stock traced out a well formed base with handle formation. The break above this formation was on high volume indicating institutional sponsorship. I think i got an excellent price on my initial purchase, but when i went back for more stock a few days later I bought at a very extended level which put me at risk. As the stock pulled back naturally, I had a larger position at a higher basis so I am now a bit under water even thought the stock has not traded in a very negative fashion.

I am watching volume carefully here as the stock has traded below the 50 day average but seems to be finding support right below this level. I expect higher prices over the next few weeks and I would like to see volume come back into the stock at this time. I am still watching 10% as a stop point and if it trades up but does not have corresponding volume I will have to think hard about turning it out.

Jan 23, 2007

Two days before options expiration would have taken half of my exposure, the company reported earnings and while the headline number was good, the guidance given by the company failed to impress the market. Some concerns include a deterioration in gross margins and the fact that the company announced it will no longer give order guidance. There were shipment delays which also cause concern from the demand side.

The stock sold off on the news even though it was trading at a fairly coservative multiple before the announcement. Currently it is holding just above the 200 day average and at this time the 200 day coincides with my stop level. I am holding on tentatively right now waiting to see if institutions will step in over the next few weeks and support the stock. If not, i will be forced to take a loss on the trade as there are plenty of other ideas that may be more promising.

Jan 25, 2007

The stock attempted a rebound yesterday but gave that ground back today. The market is flashing some alarming signals so I decided to cut back on exposure and this name is one that i am least comfortable with so i threw in the towell and liquidated today. This ends up being right at a 10% loss which is disappointing but i would rather be disciplined about selling than hopeful and stay around to take a bigger hit.