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This week's setup?

First my apologies for the midday Friday recommendation but it’s been a crazy trading week. Premium subscribers don’t forget to look at the PRMB trade from yesterday. Today is a semiconductor stock that's been holding up surprisingly well - but the warning signs are starting to show.

🔍 Trade Thesis: LRCX - This Bounce Looks Like a Fade

Lam Research (LRCX) has had a strong run, but we believe it's time to short it.

Here's why:

🚨 Cyclical Downturn Risk: The semiconductor industry is turning, and LRCX is heavily exposed.

💣 Rising Debt: Debt-to-equity has climbed, making LRCX vulnerable in a volatile market.

🆚 Tough Competition: Competitors like Applied Materials (AMAT) are showing stronger financials.

⚠️ Digital Tailwinds Are Absent: Unlike some peers, LRCX doesn't have a defensive digital moat.

This setup looks ripe for a reversion.

📊 Fundamentals: Breaking Down, Quietly

💵 Revenue - TTM revenue is down from recent peaks, indicating demand pressure.

📉 Margins - Gross margins have slipped below competitors.

🧾 Cash Flow - Positive operating cash flow, but recent positive investing cash flow might mean capex cuts or asset sales.

💥 Debt Load - Leverage has quietly crept up. In a rising-rate environment, that matters.

These numbers are waving red flags to us.

⚖️ Valuation: Stretched, Not Stress-Tested

LRCX still looks expensive relative to where it's headed.

An intrinsic valuation factoring in cyclicality, increased debt, and competition puts it well below current levels.

This isn't priced in for a downturn - yet.

🧭 Technicals: Overbought + Losing Steam

📍 Current Price: $90.57

📉 RSI & Stochastics are flirting with overbought

🔄 Momentum Divergence: Watch for a divergence between price and MACD or RSI

🧱 Resistance: Heavy historical resistance around current levels

🏷️ Trend Exhaustion: The stock is holding up, but barely

One catalyst could tip this into a new leg lower.

💥 Trade of the Week: Short Stock + Bear Put Spread

1. Stock Trade
   🔻 Short $LRCX ( ▼ 0.21% ) at $90.57

2. Options Trade (Bear Put Spread)
   ✅ Buy Jan 16, 2026 $86 Put @ $8.00
   ✅ Sell Jan 16, 2026 $70 Put @ $3.00
   💰 Net Debit: $5.00
   📉 Breakeven: $81
   💥 Max Profit: $11.00
   ❗ Max Loss: $5.00

Risk-Reward Ratio: 1.8 to 1

📊 If LRCX closes below $70 at expiration, this spread returns 180% on risk.

🚨 Catalysts on the Horizon

1. Semiconductor Slowdown - GGR and capex budgets falling

2. Rising Competition - AMAT continues to outpace LRCX

3. Debt Costs Rising - Higher rates = higher cost of capital

4. Inventory/Order Contractions - A margin squeeze from both ends

5. Technical Breakdown - A crack below $86 could accelerate selling

🛑 Risk Management Tip

🧠 Final Thoughts

Lam Research is a textbook short candidate: cyclical headwinds, increasing debt, and fading technical momentum.

While semiconductors had their moment, LRCX looks more vulnerable than most.

📉 Short at $90.57 and/or use the bear put spread for defined-risk exposure.

We'll be watching this one closely.

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Stay Liquid,
- The Resilient Trader