Vimicro attempting an H&S bottom.

Before I get into Vimicro, I like the cross verification that I get from SOX which is making a new 52 week high today. So there is strength in the general market, there is strength in the semi sector and they all confirm the strength in Vimicro. A very positive situation.




Potential H&S bottom is obvious in the above chart, with the neckline at $7.32. I like the volume action today as it accelerates with the price coming off the bottom. Very constructive price action.


This is the profile on the stock: Vimicro International Corporation, through its subsidiaries, engages in the design, development, and marketing of mixed-signal semiconductor products and solutions for the consumer electronics and communications markets in the People's Republic of China. It offers mixed-signal multimedia processors for personal computer and embedded notebook cameras, as well as for mobile phones. The company provides system-level solutions that include integrated semiconductors, customizable firmware and software, software development tools, reference designs, and applications support. Vimicro sells its products through direct sales force to distributors, original equipment manufacturers, and design houses and module manufacturers. The company was founded in 1999 and is headquartered in Beijing, the People's Republic of China.

Important facts to mention are that the company had 70% of the semiconductor for the PC camera worldwide market before the Vista roll out. They did miss their numbers during the calendar (not fiscal) Q4 of 2006 attributing it to the Vista transition but they still made money. They haven't reported numbers for calendar Q1 2007, they have changed public accountant and they will report caendar Q1 and Q2 on July 12, 2007, next week. Company has $3.00 per share in cash which I think offers a nice support for any Q1 or Q2 disappointment. Also the move from $24 to $5 probably discounted most or all of the negativity that may lay in these reports. Looking forward I can see many positives such as Vista ramp up, potential mobile phone contracts and a seasonally strong second half of the year. Fundamentally I believe that the worst is over. Just a slight positive piece of information next Thursday, in the earnings report, could be a catalyst for a sustainable move to the upside. Another important fact to note is that Janus and Fidelity own a big stake in the stock. Janus Worldwide Fund has 5.5% the outstanding shares in the stock while Fidelity OTC Fund has 4.5% of the outstanding shares in the stock and that is a vote of confidence http://finance.yahoo.com/q/mh?s=VIMC. Bottom line I like the stock and its potential and I bought some today at $5.96 with a stop at $4.8. The stop is way down and that is because I want to give the stock room to fluctuate. This is a six month to a year trade for me.