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Often, when a leading stock is setting up to breakout of a solid base it is highlighted in CANSLIM.net's Mid-Day Breakouts Report.  The most relevant factors are noted in the report which allows prudent CANSLIM oriented investors to place the issue in their watch list.  After doing any necessary backup research, the investor is prepared to act if and when the stock triggers a technical buy signal (breaks above its pivot point on more than +50% average turnover). In the event the stock fails to trigger a technical buy signal and its price declines then it will simply be removed from the watch list.

Silicon Motion Technology Corp. (SIMO $0.52 or +1.96% to $25.99) continued tracing out the right side of its double bottom, or "W" shaped pattern. Volume totals in recent weeks, while it has been working up troward prior chart highs, have been mostly average or below average, which is considered a healthy "dry up". This double bottom pattern could be completed with a breakout above the pattern's middle peak, triggering a technical buy signal.  SIMO sports very healthy ranks, with its Earnings Per Share (EPS) rating and its Relative Strength (RS) ratings at 99 and 90, respectively. The stock's Composite Rating, which is an aggregate of all other ratings, is at a very respectable 97. This stock was first featured in today's CANSLIM.net Mid Day Breakouts Report (read here) with a $26.85 pivot point.

The company has managed to increase its earnings by above the +25% guideline in each of the past four quarterly comparisons versus the year earlier, satisfying the "C" criteria. SIMO resides in the Electronic - Semiconductor group which is currently ranked 63rd of out the 197 Industry Groups covered in the paper, placing it just outside of the much preferred top quartile.  It would be very encouraging to see this group get into the top quartile in the near future, however leadership to satisfy the "L" criteria is already quite visible in other leaders in the same industry group including Siliconware Prec Ind Adr  (SPIL), Nvidia Corp  (NVDA), and Atheros Communications (ATHR).  Remember that a new technical buy signal has not been triggered until this stock trades above its pivot point with considerable gains backed by at least +50% above average volume.  Patience is important!  Buying stocks before a proper technical buy signal can hurt one's investment returns. As always, it is of the utmost importance to sell any stock if it drops 7-8% below your purchase price.

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