Well, it has been an interesting weekend and beginning to a new week.  Liberty Media (NASDAQ:LMCA) literally threw a curve ball late Friday with a new application to the FCC regarding its intent to take de jure control of Sirius XM (NASDAQ:SIRI).  While Liberty moving to control is not really new information, the new filing with the FCC is.  Now that the market has had a chance to digest this news, we can apply the data to the technical outlook.

The first thing to note is that technical analysis does not anticipate news.  It uses data from past trading to try to determine a future direction.  Once the news is past, the results of that news get thrown into the data mix of everything else and become part of the technical story.  When investing into a company, consideration to news is something to consider.  Therefore, before diving into the technicals I want to take a brief moment to look at a couple of possibilities that could impact price:

What If Liberty Needs To Buy More

Liberty Media has now announced its intent to move to a stake in SiriusXM that is over 50%.  That would indicate, at a minimum, that Liberty would need another 125 million shares of Sirius XM.  If certain events (i.e. related to the 7% convertible notes) transpire, Liberty could need as much as 300 million shares.  The logical thought process is that Liberty would have to buy shares and that this could send the stock price higher.  It is sound logic, and a potential happening in the near future.

What If Liberty Does Not Need To Buy More

One consideration many SIRI investors seem to be missing is the idea that Liberty already has the stake they need contracted.  Think about it.  Liberty has announced 2 forward purchase contracts that investors were not aware of until long after the fact.  Each of these was preceded by substantial volume in the equity.  We had substantial volume over the past week or so, but the last couple of days have been substantially lighter.  What if there is a third contract in existence that simply has not yet been announced?  If that is the case, Liberty would have no more need for shares, and thus the potential of a run up on a Liberty buy could have already been experienced.  Food for thought.

Volume

One natural question on everyone's mind was whether or not this new news changed the technical outlook.  Of course, that answer was impossible to give until we have the data to work with.  What transpired today was that SiriusXM essentially remained flat and did so on slightly higher than average volume, but volume lower than we had been experiencing recently.  Essentially the new news does not appear to be a major catalyst.

One item to note is that the overbought condition in the RSI of SiriusXM still exists.  However, it seems to have peaked at 76 and now sits at about 74.  This could be an indicator that volume will reduce and be returning to more normalized levels.  As always, the key in looking at the longer term technicals volume is the 200 day volume, but the shorter term volume can give early indicators for reversal.  The volume today was below the 5 day.  There are several days before the 13 day moves down to levels around 65 million.

The key here is watching volume closely.  Continued low volume could indicate that a top has been reached and consolidation at some level below is in the cards.  It was low volume Friday that had me call $2.60 the short term top.

Support & Resistance

The action today did change the support and resistance chart slightly.  We now have a new resistance point at $2.64, the high of the day, and also the 52 week high for the equity on even an intraday basis.  SiriusXM exhibited a bit of weakness in that it closed at the low of the day.  The $2.56 close was also a key area of support that I had indicated in earlier reports.  We now have a proverbial battleground.  Can SiriusXM hold the line at $2.56, or are we seeing early indications of a short term reversal and consolidation?

In my opinion it is quite possible that we are at the beginnings of consolidation, and $2.35 will be the key support level below.  While further data would confirm this, we have to start somewhere.  Tomorrow will be qa key indication of whether SiriusXM still has more upward fight, or if it is going to rest a bit before fighting again.  My early call is that a rest is in order.  Tomorrow will help us see if I am right.

Exponential Moving Averages (EMA's)

The EMA's remain very bullish with plenty of room between each successive level.  As stated in earlier reports, this is still healthy behavior, but what we are being cautious of is any sign of weakness.  For example, if the closing price of the equity falls below the 5 day EMA, it would be a sign of weakness.  It does not remove the bullish signal yet, but that could follow if a trend reverses.  We now have SiriusXM dangerously close to breaking the 5 day EMA, closing just a couple of cents above it.

As you can see, the data we have now presents us with the important levels for tomorrow.  From an EMA standpoint closing above $2.54 is important.  It just so happens that the 5 day EMA is essentially at the battleground level of $2.56.  Simply stated, if SiriusXM breaks below $2.56, it will in effect have broken the volume as well as the EMA technical signals.  Volume on that move will indicate the strength of a new trend if established.

Valuation Multiples

Valuation multiples below.  When SiriusXM get above a multiple of 20 (excluding NOL impact) it is the historic top of the multiple range and tends to sell back down again.  When SiriusXM gets to a multiple of 15 it tends to bottom out and buy back up.

Summary

The caution flags I have been speaking to for a week now seem to be in play.  While confirmation (2 consecutive days exhibiting the behavior) is always good, more active traders may want an earlier hint.  For the moment I see the top at $2.60 still, and a bottom at $2.35, with the equity beginning to trend lower.  Of course news could change that dynamic.  Happy trading!