NEW YORK (TheStreet) -- The short-term chart of Lam Research Corp. (LRCX) - Get Report is extended on the upside and could correct in a sideways to lower trend while the long-term remains open in the upside.

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LRCX, a supplier of wafer fabrication equipment and services to the semiconductor industry, has rallied steeply over the past five weeks. The On-Balance-Volume (OBV) line has soared, confirming the mark up. Prices cleared the 50-day moving average and are testing the flat 200-day average. The slow stochastic indicator -- a measure of how overbought or oversold a security is -- is very overbought and prices are into an overhead resistance area from $75 to $85. A pullback or a sideways correction from here would not be a big surprise.

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Look at this chart of LRCX, above. Some experienced chartists might call the price action of the last 18 months a rounded top formation. It looks like one, but the volume and the On-Balance-Volume line don't support that conclusion. If we were looking at a top pattern, we would want to see more volume in the first half of the pattern as "smart money" sold and we would want to see volume expand when prices broke below the "neckline" at $70. Neither of these conditions are visible. Also, the OBV line moves up to a new high and may be foreshadowing the future price action of LRCX.

Wondering what to do? If you have an interest in LRCX, we would be prepared for a correction in the near term and possible new highs on a longer-term time frame.

TheStreet Ratings team rates LAM RESEARCH CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate LAM RESEARCH CORP (LRCX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, compelling growth in net income and attractive valuation levels. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 12.9%. Since the same quarter one year prior, revenues rose by 38.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.43, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, LRCX has a quick ratio of 2.38, which demonstrates the ability of the company to cover short-term liquidity needs.
  • LAM RESEARCH CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LAM RESEARCH CORP increased its bottom line by earning $3.70 versus $3.68 in the prior year. This year, the market expects an improvement in earnings ($6.01 versus $3.70).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 104.6% when compared to the same quarter one year prior, rising from $141.08 million to $288.68 million.
  • You can view the full analysis from the report here: LRCX

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.