With Sirius XM (NASDAQ:SIRI) sitting at a critical point from a technical standpoint it is perhaps more important than ever to keep on top of the situation.  When an equity is on a trend it is easy to let a day or two pass without much worry that you are missing a critical indicator.  When an equity is at essential levels though, diligence rules the day and the trade, and the frequency that you look at technical side needs to increase.  In the long term things are quite fine, but there are distinct possibilities for those that are seeking adding shares, or doing a bit of trading.

As I have stated many times, I love to watch the volume on a stock.  It is through volume that we can gauge the seriousness (no pun intended) of any move.  Today, in early trading we have seen the volume on Sirius XM evaporate with the stock trading at what I consider a critical level just above $2 per share.

While my other favorite technical indicators are showing a bullish trend, the volume speaks to another story.  Is what we are seeing here simply consolidation, or will we indeed test the sub $2 range that I spoke about yesterday?  The positive is that the exponential moving averages set yet another bullish indicator with the 13 day EMA passing above the 50 day EMA.  The bad news is that all of the EMA’s are so close that trading days below $2.05 could bring down each average into bearish territory from a technical EMA standpoint.

Before going further lets look at support and resistance levels:

  • $1.91 – Moderately Strong Support
  • $1.98 – Weak Support
  • $2.03 – Moderate Support
  • $2.10 – Moderately Strong Resistance
  • $2.16 – Weak Resistance
  • $2.26 – Moderately Strong Resistance

As you can see, the resistance level at $2.10 has gained a bit of strength, while the $2.16 level has weakened off.  Sirius XM tested above $2.10 briefly but failed to keep a close above that level adding strength to it as a resistance point.  As of this writing Sirius XM is trading at $2.03 and is on the edge of what is strong support right at that level.  I will repeat my stance that a close below support at $2.03 could bring with it a brief trip down to test $1.91.  With the recent downward move on low volume, investors can have a bit of solace.  There is no real conviction behind the drop to $2.03.  That translates to no real change in what the bullish indicators are in the longer term., thus, the opportunity for a decent trade if the dip below $2 happens.

Looking at the Exponential Moving Averages we see that while bullish signs exist, the price points are still very much at a converged level.  Essentially this means that the bullish indicators could shift to bearish if a downward trend happens.  Either way, the numbers are all still converged, and a shift back to bullishness could happen just as quickly on positive news.

The key here is if the equity begins to close below the 5 day exponential moving average.  If this happens, it will begin even more convergence that merits attention.  Essentially we could be on a path where all of these EMA’s could converge at about $2, a critical level even from a psychological standpoint.  What we have is a trading range between $1,91 and $2.10 in the works.  If an investor were to catch a low at $1.91 and sell a high at $2.10 they would realize a 10% gain.  That is not too shabby on a short term, and why watching current technical indicators is important.

While those that do less trading may simply hold, there is definite possibilities setting up for a decent trade or even adding to a position.  At this point I set the chances of a trip down to $1.91 at 50%.  Stay tuned