Well, this is the second trading day in a row that SiriusXM has removed a caution flag. It is an an event that we can not ignore. Remember, the cautions always make the first moves. The wild card we have out there is Liberty Media with room to buy up to about 45 million more shares. Whether they were in the market today can not be known, but in some ways we have to assume that possibility.
With two caution flags removed in two days we have to explore the possibility that the move down to $2.55 was short lived and a bottom... at least for the moment. Remember that Liberty causes a dynamic that makes for a bit of uncertainty.
What we are seeing from a technical standpoint is still bearish in the short and mid term, but we have some small clues that we may see a reversal in process. My only hesitation is that Liberty could be propping things up. Essentially an active trader has to be ready for a bottom to fall out and a trip to $2.65 or so, as well as consolidation and a possible pop up to $2.75 or so. Compounding the issue is that this is a holiday week. We can and very well may see volatility.
The volume today was moderate to high. The problem is whether or not Liberty was involved. If Liberty was a buyer today then we would have had light volume. If not, we have consolidation volume. Do you see how the Liberty cloud can make a call tough?
Support and Resistance
Key levels are $2.74 and $2.60. We are at the top end of a range today with volume to light to put up a real test. It makes for a tough call. I can see this equity dipping and bouncing off of $2.68 just as easily as I can see it testing $2.74. In fact, I can picture both happening in tomorrows action. The key here is the volume on the moves, and paying attention to the EMA's. All EMA's sit inside a range of $2.68 to $2.74. That is a very narrow band, and something is gonna give one way or another. Liberty certainly knows when to become active. Essentially it seems to be that as soon as this equity seems lost on direction, Liberty hops in. Amazingly they are able to acquire millions of shares in a narrow range when they trade like this. Think about it... Liberty accounts for 25% of the volume and the equity can not really pass $2.75!
Exponential Moving Averages - EMA's
We have some new members, so a quick review of EMA's is in order. The concept is that when each successive average is higher than the next it is bullish (i.e. the 5 day above the 13, 20, and 50 and so on). If the averages are below it is bearish. Right now we have all of these averages converging. That points to a break one way or the other. The prices in red are caution flags (early indicators). The blocks below are warning flags (where the equity is now).
With the EMA's we are seeing convergence, and as I indicated last week it looks like that will happen at about $2.73, just below resistance at $2.74). It app[ears that this equity is poised for a run to $2.95 or a dip to $2.60 from a pure technical standpoint. The other option is consolidation, but when these averages converge like they have, the equity will typically want to make a move.
Liberty is a wild card. If we remove Liberty from the equation would the equity have removed two caution flags in the last two sessions? That is the $1 million question! At this point what we can do is assess the range and watch volume closely to determine direction. A move does not really have unless it has 85 million shares behind it. Being an active trader in this environment is not easy. f I am out I do not worry about the upside unless there is big volume behind a move above $2.74. On the down side I do not worry unless there is big volume below $2.68. Thus, I am a buyer on big volume at $2.75 to capture a pop, and a seller if an move goes through $2.68 on big volume.