NEW YORK (Real Money) -- We all hate the semiconductors now. If you didn't get the memo, then here's your wake-up call.
The good news is many names like Intel (INTC) - Get Report and Applied Materials (AMAT) - Get Report, a name I own at higher prices, are pushing into the green today. Still, most of these charts are just tough to look at here. One reversal does not change the overall bearish stance.
One name concerns me more than others, though, and the failure of it to get green while many other big names in the sector have at least gotten back to breakeven today confirms it. That stock is Lam Research (LRCX) - Get Report.
Lam isn't without a bit of a bounce today as the stock sprung off the $70 level, but there are major issues with the chart and without a bigger bounce this one is broken.
Lam Research (LRCX) -- Daily Source: StockCharts.com
Yesterday, Lam saw its worst day since October. That October low proved to be a great buying opportunity. Yesterday doesn't look to be quite the same. Those drops have created a nice trendline, but today's gap down put that trendline into question after Lam closed below the only other clear support of $75 yesterday. The October low came with a capitulation-size move shown in the Force Index. While yesterday's move was definitely one of the largest moves in the Force Index, we've seen in the last year, I wouldn't put it quite in the capitulation camp yet.
Furthermore, we aren't oversold yet in terms of the Money Flow Index, which has been a good indicator of a temporary bottom. I do think a bounce is possible here, but any move into the $73-$75 area will likely be met with selling. Instead, I anticipate a new channel to develop here in the $68-$73 area. If the lower end does not hold, then I would not look for support until $58. In the short term, if a trader wants to be long in the semi space, I would go with larger, more conservative names. At this point, only buying relative strength in the sector is logical.
Scaling back to the weekly chart, we get a better picture of where the lower side of the anticipated channel comes into play. The rising support trendline should be in the $66-$67 area next week. Although we haven't tested this trendline for a year, I still believe it will hold here. But it is now a target, which makes buying Lam here a risky proposition. The stock has a firm double top now in place just below $85 and there will be lots of traders wanting to get their money back between $75 and $84.
LRCX Weekly Chart - Source: StockCharts.com
In other words, buyers in that range likely have some buyer's remorse right now and will see breaking even as a win. Again, the Force Index for this name demonstrates buying the extreme spikes has worked the best, especially when the stock trades into a support price. A quick glance into the relative strength -- mentioned as something to be aware of when buying a sector under pressure -- shows us the longer term RSI on LRCX has entered a bearish zone now registering just about 40. So, while it is bearish, we are nowhere near oversold. Given we haven't seen an extreme negative reading on the force index, we aren't yet oversold on the RSI and we haven't touched price support, this one looks like a Lam to the slaughter for the semiconductor sector.