SiriusXM is bullish one day, bearish the next, only to be bullish again. It is a virtual tug of war! This is classic consolidation. It is both bearish and bullish. Let's simply call it Bellish. Half Bear and half Bull!
SiriusXM traded on light/moderate consolidation volume today, and stayed within the narrow range I have identified in previous posts. In fact, the consolidation is now getting very tight. At one time I had felt the EMA's would converge at v$2.73. Then it looked like the convergence may by about $2,68. Now we are back to a possible full convergence at $2.73. Wow...This is dizzying!
If you are a simple buy and hold player you are sleeping easy. If you are actively trading you are either frustrated or nervous. Once again, none of the trade signals I established for my mock account happened today, thus I am still at 1,000 shares. The action today was not noteworthy for the support and resistance levels, but it did change the EMA's once again! We have moved from things looking bearish short term to things looking more bullish but not yet demonstrated. This happens when moving average get on top of each other in the manner we have been seeing. Today the equity closed up, and erased some cautions and warning flags. What will tomorrow bring? Probably more consolidation... however... we must be sensitive to the overall market, potential news flow, and the fact that when EMA's converge a decent pop or dip is likely in the cards.
One key to the action today was the volume. It was classic consolidation volume. Not real high...Not real low. That is a perfect signal that consolidation is happening. Believe it or not, the fact that SiriusXM is showing resilience to the macro-economic situation is bullish in and of itself. There is uncertainty and SiriusXM is not immune. However, instead of tumbling it is simply not popping. It is possible we see SIRI dip, but the resilience gives us solace in that the equity should not get crushed.
Support and Resistance
This picture looks essentially the same. We still have challenges in getting past $2.74, and we still have the lack of a real safety net in the $2.60's. Ever walk on thin ice? If you make it across it is great and fast, but you can feel the weakness in the ice the whole way across! We want to watch $2.74 closely and how strong the volume is when the equity approaches that level. We want to watch the 50 day EMA at $2.70 closely as well. It does offer support, but not in the classic sense. Keep $2.60 on your radar screen. If $2.69 or so breaks we could see a quick dip. I do not think it will be long lived, especially if it bounces at $2.60.
Exponential Moving Averages - EMA's
If you have been following these reports regularly, you may well be frustrated. There is a lot of back and forth happening. That is what consolidation is all about. This is the time to pay close attention, because when a move does happen you want to be ready. The one day trend is an equity in the green. We saw every caution flag removed today, but gained a warning flag! Bull or Bear? How about Bell (the combination of the two. This is exactly why you want to have two strategies at the ready. This is why having a core position and over core positions can be helpful. It allows you some breathing room and latitude. No one gets every call right all of the time. The big swings are easier to trade. The middle ground is much harder!
What we want to see is the equity set up and make its move with enough of a hint for an active trader to make a play. If SiriusXM can pop to $2.78 in tomorrows action it could serve to eliminate warning flags and give an indication of the next moves. This is where confirmation of moves also comes in handy. Confirmation allows a move to happen, waits until the next day to see that trend confirmed, and then you jump into action. Not waiting for confirmation is oft the most costly mistake a trader will make. Yes, by waiting for confirmation you may give up a few cents, but you also will not find yourself on the wrong side of the trade.
There were no trades in the mock account today. The equity did not meet any of the parameters I set up to conduct a trade. Thus, the account is $20 down, but we still have all 1,000 shares. The strategy for tomorrow is similar to that of today, but slightly refined. Bear in mind, that I do not buy more shares of SIRI, so the way I build the core or cash is simply by trading. If SiriusXM dips below $2.69 on moderate/high volume I am a seller of the Level 2 Over Core position. If it passes hits $2.64 on moderate high volume, I am a seller of Level 1 Over Core. If the equity hits $2.57 on moderate high volume, I am a seller of Core. On the buyy side, I buy back in if the equity bounces off of $2.60, or volume dries up. My level 2 Over Core will not wait for confirmation. My Level 1 Over Core will tend to wait for confirmation, but a clear move could have me hop back in.
Watch for more consolidation but be ready with a strategy to take action on a pop or a dip that happens on volume.