If you are an active reader of SiriusBuzz you already know the answer to this question, and what it means to the equity. If you are new here, you should be able to catch on quickly. SiriusXM traded down today on moderate volume. There are actually a few stories within this story. In early action we saw decent volume and an equity that took a quick trip down toward the 13 day moving average. We then saw a recovery on decent volume, and then we saw it all dry up! What does all of that mean? Does it really matter with the news that Karmazin is leaving?
First things first. Karmazin leaving throws a wrench into the works a bit, but let's set that aside for a moment and look at the pure technical story absent the news. Yesterday I indicated that the morning action would tell the story, and that I felt that all "bets" would be in starting Wednesday afternoon. I have also said that these trips down would be short in nature. What we saw today was jockeying for position. It appears that there is a general feeling that we have better than average potential for a compelling Q3 call that will contain actionable information. How do I say that when the equity is drifting down? The answer is simple. It is not a conspriacy, it is market dynamics at play.
When this equity tests the 10 or 13 day average it sets up a fork in the road. One path involves the overall feeling that SIRI is a positive story that deserves to continue up and the other is that the equity might be overvalued and deserves a correction. The 13 day average tends to be a pivotal point. If you look at the history of this equity you can see this play out time and time again. What a savvy investor does is try to gauge the sentiment and make the appropriate play. We will not always be right, but if we are right more than we are wrong, we can profit from that basic understanding.
We tested the 13 day on volume. We recovered from that test on equally compelling volume. We settled down and spent the balance of the day coasting on little volume. Translation....Consolidation in preparation for a move. There is a small group of "nay-sayers", a small group of "yeas", with a larger group of the "ShowMe Somethings". This is where the call comes into play. The Show-Me's are like undecided voters in an election that can send the election either way. In my opinion most of the Show'Me's are leaning toward Yeas.
Now to the Karmazin news. This is an event that will shake things up a bit. Certainly Karmazin has cache on Wall Street. With him leaving the Q3 call becomes more important than ever. The street is going to want to have confidence that this company can function without Karmazin at the helm. That will mean that we have several days of market uncertainty. A savvy trader can take advantage. The bast way to do that is to understand the technicals at play!
Volume was lower than average and lower than the previous day. It demonstrates a lack of conviction above $2.90 and a lack of conviction below $2.80. Consolidation would seem to be the order of the day tomorrow absent the Karmazin news..
In order for there to be any meaning to a move tomorrow, it would need to happen on share volume of over 80 million. Lighter volume would be continued consolidation and/or jockeying. Simply stated, if this equity closed at $2.90 on low volume I would not consider it serious. The same is true if there is low volume and it closed at $2.80. If I were an active trader, what I would look for here is opportunity by watching volume at the key levels and how the equity reacts. Yes, you can pick up a few cents, but it is not as easy a task as some might think. We are still in the zone where you would have to be willing to lose up to a nickel if you are trying to time an out-and-in trade.
With the Karmazin dynamic things change. We can expect big volume tomorrow, It will be meaningful. It puts that 20 day average (about $2.75) front and center for us to consider. If that breaks, then the 50 day (about $2.60) has to be contemplated. Realistically speaking I see the 20 day as the immediate bottom on this news with the 50 day coming into play if $2.75 breaks on volume.
Support and Resistance
This chart is very important. Remember how I stated that there is little strength to several support and resistance levels. Now you see why knowing that carries importance. Key support is $2.75. Break that and there is little to stop a slide to $2.60. The question will be how the market takes this news.
Watch $2.80 and $2.75 closely. If I were a trader I would sell at open if the equity is above $2.80. If not, I would wait to see what happens at $2.75. If volume is heavy I would consider selling. If volume is lighter, I may stand pat.
These remain bullish with one caution flag up because the equity closed below the 5 day average. I will simply post the chart for now. The long term story is bullish. This cloud simply needs to pass.
A close below $2.81 or $2.75 adds caution flags. In my opinion they will be short lived.
This news means watching volume closely. While a sell here is very tempting, I am not an immediate trigger puller unless the open is above $2.80. Bullet Points in the trading tomorrow will be issued.