Wow! What can be said other than SiriusXM continues to press new highs! The company started off the week with a proverbial bang by closing at a 52 week high of $2.51. What a start to the week. The question is, can it continue? For that we need to step into the technicals of the company and digest another round of information.
The good news is that volume on SiriusXM was above normal. The bad news is that the volume presented today was down substantially over what we had seen in previous sessions recently. Volume on Monday, August 13th was a bit over 75 million. Is this the beginnings of volume tapering of? That will take more trading days to see, but the fact that we are seeing volume tick down now is a factor worth noting. It is not a bad signal, but still it is worth keeping in the back of your mind.
What we have here is a caution flag on the track. It does not mean to change a sentiment, but simply to note that something might be beginning to happen.
Support & Resistance
The biggest change today was that we now have a new support level at $2.43. While it is a weak level, it now exists thanks to the trading action today. I am not yet calling $2.50 support simply because the equity spent most of the day trading just below that level. The fact that it closed above $2.50 is a positive, but the question is whether or not this can hold. The level at $2.50 carries a light potential of being a battleground in my opinion. This is where the options expiration comes into play. Will the market allow the $2.50 options to close in the money, or is a takedown in order.
I had been hinging my bets on a takedown of sorts to come into play. With the action today, it is still unclear. On one hand SIRI traded above a key level and closed at a 52 week high. On the other, it did this on lighter volume. But then again, the volume was higher than average. I feel like a scene from Princess Bride is playing out in my head where the Hero Westly challenges Vizzini to a battle of wits over two goblets of wine, one containing poison.
“Where’s the poison? But it’s so simple! All I have to do is divide from what I know of you – are you the sort of man who would put the poison into his own goblet or his enemy’s? Now, a clever man would put the poison into his own goblet knowing that only a great fool would reach for what he was given. I am not a great fool, so I can clearly not choose the wine in front of you. But you must’ve known I was not a great fool, you would’ve counted on it, so I can clearly not choose the wine in front of me. I haven’t made my decision yet, though. Because Iocane comes from Australia, as everyone knows. And Australia is entirely people with criminals. And criminals are used to having people not trust them, as you are not trusted by me, so I can clearly not choose the wine in front of you. And you must’ve suspected I would’ve known the powder’s origin, so I can clearly not choose the wine in front of me. You’ve beaten my giant, which means your exceptionally strong, so you could’ve put the poison in your own goblet trusting on your strength to save you, so I can clearly not choose the wine in front of you. But, you’ve also bested my Spaniard, which means you must’ve studied, and in studying you must’ve learned that man is mortal, so you would’ve put the poison as far from yourself as possible, so I can clearly not choose the wine in front of me. Ha, it’s worked; you’ve given everything away. I know where the poison is. And I choose- (points behind Westly) what in the world can that be?! (switches goblets) Oh, I could’ve sworn I saw something. Well, no matter. Let’s drink – me from my glass, and you from yours. (drinks, then laughs) You think I guessed wrong, that’s what’s so funny! I switched glasses when your back was turned! Ha ha, you fool! You’ve fallen victim to one of the classic blunders! The most famous is “Never get involved in a land war in Asia”, but only slightly less well known is this – “Never go in against a Sicilian, when death is on the line!” Ha ha ha ha ha ha ha ha h-!” - Vizzini
We are in the classic battle of wits on the technical front! On one hand there is very little reason for SiriusXM to not continue an upward march, but then again, it has been quite a run, and needs to settle down at some point. What we are trying to do is what Wesly did. He was immune to the poison and had poisoned both glasses of wine!
Exponential Moving Averages (EMA’s)
The Exponential Moving Averages are still showing all bullish signs. This is great news. As always, we are looking for signs of weakness that might indicate a reversal of sorts. The lower volume gave us a yellow caution flag today, but as yet there is no indication that there is any real weakness. What we have are nice comfortable ranges in the numbers that give plenty of room for consolidation without going into bearish territory.
One key element to note is that both the 5 day and 13 day averages are above what I have been calling a consolidation point at $2.26. I have been noting that the argument for moving that consolidation point up to $2.35 is getting stronger. Today it is even stronger than my earlier report, but alas, I still see $2.26 being tested at some point in the not to distant future. The good news is that a visit to that level is looking more and more like it might be brief.
From a support and resistance standpoint we want to see $2.50 hold. If that does not happen, $2.40 becomes a key. Happy trading.