The markets are mostly red in early trading today and Sirius XM Radio (SIRI) did not buck the trend. The equity broke through a key support level that was at $1.07 and has approached but remained higher than another key level at $1.01. For investors in Sirius XM, this presents a quandary of sorts. Some look at this dip as a good buying opportunity, but on the flip side of the coin, the company is dangerously close to the $1.00 mark which carries importance on a few levels. Options expiration on Friday does not help the situation.
Staying above $1.00 has a psyche attached to it as well as the possibility of being included in the Russell Index re-balance. I have noted a possible trading strategy that assumes the equity will close over $1.00 on May 28th, which would virtually ensure inclusion in the Russell re-balance. If you are following such a trade, this dip should be a great opportunity, assuming that the equity can hold the line.
Sirius XM recently raised guidance, a move that some see as an effort to bolster the confidence in Sirius XM. The day the new guidance was released, the company closed up two cents. Now that two cents and more has been given back.
From a technical standpoint the strong support at $1.07 will likely become a strong resistance point. The two levels of support below current prices are a point of moderate strength at $1.01 and a weak support at $0.98. Watch the day closely, and remember that options expiration is tomorrow, so some moves in the equity surrounding options expiration are normal.
Stay tuned and develop your strategy. I think the equity can hold the line, but there are still two days of trading before options expire. It could be an interesting couple of days.
Position - Long Sirius XM Radio