Sigma Designs

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One more trading idea for a January Effect play is Sigma Designs ( SIGM), a fabless provider of system-on-chip solutions, which are used to deliver multimedia entertainment throughout the home. The bears have hammered this stock in 2011, with shares off by a whopping 57%.

This stock once traded as high as $15.02 a share, but it has since then dropped to a 52-week low of $5.68. Shares of SIGM are starting to show strength today with the stock hitting an intraday high of $6.06. It looks like the January Effect is already starting to show up for SIGM since buyers are stepping in despite the overall market weakness today.

My trading plan for SIGM is to buy this stock off any noticeable weakness and simply place a mental stop that's a few percentage points below that low of $5.68. If the stock closes up today and volume finishes near or above its three-month average action of 229,819 shares, then that would trigger a January Effect trade for me. My target on the upside is its 50-day moving average of 7.39 a share, or possibly much higher.

This stock has a decent short interest, with over 7% of the tradable float currently sold short by the bears. These short bets could help to fuel a much larger move higher for SIGM if the January Effect buyers step into the stock in the near future.

To see more January Effect candidates, including THQ ( THQI), Renren ( RENN) and New Energy Systems ( NEWN), check out the January Effect Stocks for 2012 portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.


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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to and maintains the website, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.

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