This Semiconductor Stock Could Soar – Schaeffers Research (blog)

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Chip stocks will likely be in focus this week, with NVIDIA earnings due after tonight’s close. One under-the-radar name that has been trending higher with the sector is Lam Research Corporation (NASDAQ:LRCX), which hit a record high of $170 on July 27, after the company’s earnings report was met with a round of price-target hikes. LRCX stock eventually closed lower on the day — and has since pulled back to trade at $150.91. If past is precedent, though, it could be a prime time to bet on the equity’s next leg higher with options.

Lam Research shares are now trading within one standard deviation of their 80-day moving average after spending a considerable amount of time north of here — a historically bullish signal for the stock in the past three years. According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, following the last 10 pullbacks to this trendline, LRCX has averaged a 21-day gain of 4.9%, and has been positive 89% of the time. 

lrcx stock daily chart august 10

The stock could also find some options-related support, considering its gamma-weighted Schaeffer’s put/call open interest ratio (SOIR) is docked at a top-heavy 1.23. In other words, near-the-money puts outweigh calls among options set to expire in the next three months or less. By far, the majority of this put open interest is docked at the 150 strike, which could serve as a foothold for the shares, as the hedges related to these bets unwind.

lrcx options open interest august 10

Plus, Lam Research stock boasts an elevated Schaeffer’s Volatility Scorecard (SVS) reading of 79. This indicates the shares have tended to make oversized moves, relative to what the options market has priced in — a potential boon to those buying premium on the stock’s options.

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