It was an interesting week for investors in Sirius XM Radio. The company qualified possible Russel Index inclusion Friday after seeing itself removed from the MSCI Barra Index only days before. Sirius XM has been in a bearish trend for well over a week, yet somehow the equity managed to do what it took to stay above $1.00. The big question on the minds of many is what happens next,
From a technical standpoint Sirius XM Broke through and closed above very strong resistance at $1.02. That very resistance now becomes support. The scary thing is that this action happened on low volume. While $1.02 is still a strong section of real estate, the company sits just above, and Tuesday will give an indication of what to believe.
The various technical indicators are a mixed bag in the short and medium term, and bullish longer term. Many indicators are what is called "neutral" This simply means that more information is needed to determine whether things are bullish or bearish. While this can be frustrating for investors, there are some who thrive in this market by developing their strategy early.
For the past couple of weeks we have been looking at volume, key resistance and support, and Exponential Moving Averages (EMA's). I will continue that trend this week. From a volume standpoint, with the exception of the day that the MSCI Barra index made their sale, volume has been weaker than normal. This would seem to indicate consolidation without real pressure in either direction. The EMA's confirm this.
As you can see, these averages are all converging on each other, and while there is a mix of bullish and bearish signals, a mere penny makes a huge difference. With the possibility of the Russerll Index reconstitution we would tend to side with the bulls.
Support and resistance levels are as follows:
Resist. - $1.23 weak
Resist. - $1.14 weak
Resist. - $1.11 moderately weak
Suppt. - $1.02 very strong (be cautious as the equity barely closed above this level)
Suppt. - $0.98 weak
Suppt. - $0.92 moderately weak
Suppt. - $0.89 weak
Suppt. - $0.84 very strong
The key battleground is at $1.02. Sirius XM closed just above this level on low volume and at the very end of the trading day. If the equity moves higher Tuesday, some of the tension that currently exists would dissipate. Weak resistance above should allow the company to move up in an organic manner. Should the equity drop below on Tuesday, there is also a lot of room to flounder. Tuesdays action will be key to giving investors a hint of direction.
Position - Long Sirius XM Radio