SIMO Could Benefit From Bargain Hunting
As stock prices reach record highs, some investors become concerned about a potential decline and look for bargains in an expensive market. This makes value stocks attractive and Silicon Motion Technology (NASDAQ: SIMO) could be on the potential buy list of value and income investors who will interested in the dividend yield of 4.2%. Value investors might find the low P/E ratio of 13 based on next year’s estimated earnings to be appealing or they could believe the stock is undervalued based on its PEG ratio of 0.85. The PEG ratio compares the P/E ratio to the earnings growth rate and with values below 1.0 highlighting potential buys.
These factors could all serve as a catalyst for long-term gains in SIMO and there are several indicators that point to SIMO as a short-term buy. The stock is currently oversold with a PowerRatings of 8.
PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter trades on stocks with a PowerRatings of 8 or higher with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.
In the past, buying stocks with a rating of 8 on a 3% pullback the next day and selling five days later has been profitable 71% of the time. The average winner has gained 3.1%. Other entries and exits also show high winning percentages and large average gains.
Multiple indicators confirm the PowerRatings buy setup. These indicators can be followed at Trading Markets Analytics with a screen that shows multiple indicators at a glance. ConnorsRSI is oversold at 18.03 and the 2-period RSI is 3.74. These indicators are considered oversold when they are below 20.
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All data is as of the end of day on 12/23/2013.