I am sure you are happy that SiriusXM closed at $4.10. It has been a long time coming. I do not want to dampen the mood, but my word of caution is this. The move happened on less volume than the move to $4.05. In very simple terms, the move up is somewhat muted. It does not mean that an upward move is done, but what it does mean is that the street is proceeding with caution as we go into the quarterly call.
I am adding a new chart today to illustrate something compelling. Please see below:
Please notice the size of the gap between the 20 day EMA and the 50 day EMA on the last two runs up. On both occasions that gap was about 15 cents. Currently the gap is 10 cents. This implies the upward mid term target. If a move up happens quickly, the near term peak will be about 15 cents more than today's close. That would imply a potential upside of $4.25. In my opinion, under the right circumstances, this type of move is possible.
The second thing I want you to notice is that the bull runs are flattening out a bit. The first bull run took a month to move 25 cents (looking at the 200 day EMA). The second bull run took 1.3 months. We are approaching 2 months on the current bull run. With the current knowledge we have, the upside begins to get limited at about $4.25. That will be the case until we get company guidance on 2014. Once we have new guidance, being bullish beyond $4.25 becomes easier for the street to accept. That is one dynamic we will want to watch in the quarterly call...whether or not we get guidance.
The last item I want to draw your attention to is when the equity corrects. When the 5 day EMA passes through the 20 day, it almost always will test the 50 day EMA. You can see what happens when the EMA's constrict, and what happens when the let out looking at the chart above. More on current EMA's below.
On support and resistance we still have two levels of strong support below. I have moved my short term target to $4.10 (where we closed), and added a mid term (albeit the very near mid term) at $4.20.
What we want to watch for now is the volume action on moves. We want to see high volume on any moves up.
The EMA's remain all green. We have a line in the sand at $4.00. I anticipate a move up on the call. I expect the company to offer up some guidance on 2014. I feel this is necessary given the debt issues that the company has put in place in recent months. The debt to EBITDA ration needs to remain attractive to justify valuations beyond $4.25. The street will give a bit of latitude here, but the longer we go without guidance, the more difficult it is to maintain justifications.
If you like what you see here....spread the word so other investors can get this insight as well.
Support and Resistance
Exponential Moving Averages