Silicon Motion Technology Corp. (SIMO)
Update - 10/4/07

It's been a full month since our original report on SIMO, and we are updating the outlook after four weeks of trading, as there are some changes to note from the original projections.

First off, we still think a retest of the $29 high of July would be the best resolution to the longer-term pattern, which could be accomplished by either of the suggested wave counts.  The ALT count would imply a large Wave 5, while the "red" count suggests Wave 1 to be the extended wave.  It really matters little, since both would project a retest.  As I said, this would be the most idealized count.  Now, because we see the SOX index under some pressure (although probably with another high still left) the advance pattern in SIMO could be counted as an "X" wave advance, suggesting this to be only a counter-trend bounce.  If that proves to be the case, then the stock would likely sell as it nears the 25 level, where there is significant resistance.  

The best chance the stock would have for the more bullish counts would be to make it through this level.  The pullback pattern has been corrective, so the stock should push for another high.  For the red count to be valid, SIMO should not pull back below 21.69.  If it does, then either the blue count or the X wave is playing out.  21.08 is lower support, and the stock should remain above 19.32 for us to continue to count the advance impulsively; otherwise if it breaks below, a retest of the 16.60 low of August would be more likely.  

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