Technical analysis is often more of an art than a science. No matter what technical indicators you follow, there are factors that can happen that simply over ride everything else. A huge news announcement, a revolutionary product, or some other event could make all technicals moot in a mere moment. That being said, there is still value in technicals and they are a tool investors can use to gauge the market or even a specific equity.
SiriusBuzz has been following Exponential Moving Averages, volume, and key support and resistance levels for a while now, and these indicators have been showing several key moving averages converging. This convergence was a clear signal that there was a bearish sentiment to SIRI. With the action of this week, the 5 day moving average ($0.97) has slipped down even further, and the EMA's are now showing a continued bearish trend (Click image to enlarge). Sirius XM is now trading just below the 5 day moving avearge, and about 4 to 5 cents below the 13, 20, and 50 day averages. The bearish trend seems to be continuing, and all it would take would be a nickel to reverse it. The question is what will reverse it.
The Russell index will be announcing their preliminary additions and deletions to the Russell Index this Friday. On May 28th Sirius XM qualified for the Russell Index by closing above the $1.00 requirement instituted by Russell. Sirius XM meets all requirements for Russell inclusion, but as yet there has been no announcement from the Russell about which company's will be added, and which company's will be removed. While many who follow satellite radio closely already know that Sirius XM will be added, many people do not. The announcement by Russell Friday will be the first confirmation by the Index itself that SIRI is on the list of additions. This will be the first time that many investors will see this news. Friday could be the type of news that can reverse the bearish trend Sirius XM has been suffering of late. That news alone, should it deliver a 4% boost in Sirius XM, could be enough to change the EMA technicals from bearish to bullish. The key is the equity closing above the 5 day moving average, and then each subsequent moving average being higher than the next.
The next few days will set the table for what happens going forward, and readers can follow all of the action right here on SiriusBuzz.
Position - Long Sirius XM Radio