Well, it is time once again for the weekly SiriusBuzz Technical report on Sirius XM Radio. It has been an interesting month, and for those that have been following, it is a great time to learn about Exponential Moving Averages (EMA's), Support and Resistance, and Volume. These three technical indicators are what I have been writing about of late, and the combination of these technical styles can give investors insight as to the trends of the equity.
The EMA's are once again more bullish on Friday's close than they were on Thursday. Sirius XM closed out the week at $1.04 and that has now bumped up the 5 day moving average above the 13 day instead of being the same. As the shorter term averages get above the subsequent averages, the trend upward gains bullishness. The convergence has happened, and the stock is getting more bullish each day from an EMA standpoint. Going into the Russell Reconstitution with strong technicals is the position longs and traders have been wanting to see.
The 5 day moving average now sits at $1.02. This also happens to be above the very strong $1.01 support level that Sirius XM remained above all day on Friday. The 13 day, 20 day, and 50 day moving averages all sit at $1.01. As the equity climbs, the shorter term averages will climb as well setting up a more and more bullish outlook. (Click Image To Enlarge). Things are looking quite positive from an EMA standpoint, and technical indicators such as this will instill more confidence in the equity. With that confidence will come volume, which represents additional confirmation that the bullish move is real.
On the subject of volume, things are still very light. The recent move from about $1.00 has all happened on light volume. The equity had been trading in a small range just above and just below $1.00. Money sat on the sidelines and has been awaiting a signal that the equity will make a new move. What we want to see now is increased volume prior to the Russell Reconstitution. Moves on light volume indicate uncertainty, and often the stock will trade in a range until something triggers a bull or bear run. I expect Sirius XM to continue to walk up slowly, but will be watching to see if the volume begins to increase. There is plenty of liquidity in this stock, so the move will take some doing, but it can happen.
From a support and resistance standpoint Sirius XM had a great day. The company never even tested the $1.01 support. Support at $1.01 is very strong, and the fact that Sirius finally broke through and stayed above it is confirmation that it can remain above it and build. The next real resistance for Sirius XM is at about $1.10. That support level is very weak, as are the resistance levels at $1.14 and $1.22. The nice thing about having weak resistance levels above is that this is ground that has already been tested, and it has proven to be weak. The area above $1.22 is no-mans land. It could be wide open, or there could be a wall that develops which will challenge the equity again.
Overall I am bullish, and that bullishness is reinforced by the pending Russell inclusion. The biggest question many seem to have is what the potential of the Russell re-balance will mean. I would feel safest with an assumption in the range of up to a 20% bump from current levels, that will be short lived, and followed by a retracement (this would be a healthy event that would allow SIRI to build support). If you haven't been following the technical reports you can see the moves being referred to by looking at our past reports for the last month or so.
Position - Long Sirius XM Radio