Probably my favorite stock this year, and definitely my most successful long position, has been Lam Research Corp (LRCX - Get Report) -- the wafer kings. In a world where the semiconductors came to rule the roost, this sort of under-the-radar name has been performing with the best of them. With significant gains at risk, and the name coming under some recent pressure, is it time to preserve capital here? As I said, I am long the name myself. The stock is still up 100% for the year. This is my actual homework. Not some fancy pants on TV with no skin in the game.
What I see here is a Moving Average Convergence Divergence that emitted a bearish crossover, albeit at an extremely bullish level at the month's start. LRCX moved sideways for two weeks in response. An attempt to cross the 12-day exponential moving average over the 26-day EMA (which would have been very bullish this far above the 9-day EMA) on Nov. 20 failed. In response, Relative Strength has softened a bit, though Money Flow remains very strong and has not really let up since August.
My Andrews' Pitchfork model is somewhat problematic. Clear to see that the lower trend line is under severe pressure and is getting a bit ragged. If you were late to this name, this level itself becomes short-term important. Now, I am playing with house money in this one. Some of you probably are also. Given that we can lose some of the edge here, and still come home with some nice dough, I probably allow this name to test the 50-day SMA of 197 before I panic, and start pulling triggers. That said, I am nowhere near considering the application of new capital here at this time. For now, I hold. It's tentative. I still think that a late-in-the-year push for performance could land this stock somewhere close to $230.
At the current last sale, the stock only trades at 14x next year's projected earnings. Not an expensive name, fundamentally. Oh by the way, Intel Corp. (INTC - Get Report) , another of my long-side top performers this year, is also still cheap -- and pays a 2.44% dividend yield even at these prices.
(This is an excerpt from Stephen "Sarge" Guilfoyle's Morning Recon, which now appears exclusively on Real Money, our premium site for active traders. Click here for a free 14-day trial and receive Morning Recon every day, along with exclusive columns from Jim Cramer, James "RevShark" DePorre, technical analyst Bruce Kamich and more.)
More of What's Trending on TheStreet: