Well, today was an interesting day.  There are likely readers out there that are wondering what my reaction to what transpired today will be.  My philosophy remains the same.  I am bullish in the mid and long term, but see room for a short term dip in the price over the next week or two.  Determining the exact timing of that dip is challenging, as is the depth of the dip.  It is for that reason that we watch behaviors of the equity as it absorbs news, approaches key levels,  and the volume happening at these times.

I have spoken in the past about cresting and wanted to bring it up again today.  No, SiriusXM did not dip down today, but we were not necessarily expecting it to happen with urgency or immediacy.  What we saw today gave us a few clues.  The resistance at $2.80 is a psychological barrier.  The equity did not have the news, volume, or strength to even really tap $2.80 on the shoulder.  It will in time, but it was not today.  We did see some strength at $2.75, but at the end of the day the equity did not hold that line either, and closed at $2.73.

Those that buy and hold are sitting back and resting.  The traders are the ones with gray hair and ulcers right now.  It can be very nerve racking when you enter a trade.  The key is being patient, disciplined, and strategic.  Perhaps the most important of those is strategy.  Before entering a trade you need to have a strategy in place that accounts for risk tolerance.  In essence, you need to be prepared to take a knock on the head, shake it off, and look for the next trade.

In my opinion this equity can test the 20 day moving average at $2.62, and perhaps, on now news, test the 50 day average that will by that time have climbed to about $2.55.  Neither of these worries me, as I also see the equity bouncing off of these and moving back toward $2.75 or $2.80 in short order.  The key here is watching the action, analyzing the data, and developing a strategy.

Volume

Volume  today was higher than normal but substantially lower than yesterday.  The equity traded quite a few shares above $2.75, so there is definitely the ability to test $2.80.  It would need to happen on 80 million shares or more.  More likely though, I see this equity giving a test of $2.70 before testing $2.80.  It is if $2.70 breaks that we will see the 20 day and 50 day averages come into play.

 

If we see volume tomorrow continue to lighten up, it will be a signal that the news of the last day or two is settling out of the equation and the technicals can take over the action.  In my opinion, very light volume (under 30 million shares) and a close above $2.70 would indicate that $2.70 is very strong.  Watch for that because if you sold near the top and are looking to re-enter, you need to find a point to do so.

Support and Resistance

The battleground now sits between $2.67 and $2.75.  A more narrow range is $2.70 to $2.75.  The more narrow range is the one I was referring to above when discussing whether or not $2.70 will show dynamic strength.  Resistance at $2.80 has some strength, but I would call it more psychological than technical.

The key level now is $2.70 and $2.67 to the downside, and $2.75 to the upside.  Watch for how the equity reacts when it approaches these levels.  Does it bounce off strongly or test the waters on the other side of these levels?  A strong bounce shows strength, while testing the waters on the other side demonstrates a willingness to break through (on the up side or down side)

Exponential Moving Averages - EMA's

The EMA's remain bullish.  The gaps look nice, and there is room for a dip without losing the overall bullish trend.  This is something we like to see, though for active traders it can make timing difficult.

Note that the 5 day and the 13 day averages sit right around the key levels I discussed above.  Breaking the 5 day average is not anything to worry about.  Breaking the 13 day is what I expect, and by the time that happens the 20 day should be a few cents higher.  calling a traders bottom is not easy at this point, and it is a day by day process.  If someone wanted to pin me down and beat an estimate out of me I would say it is between $2.62 and $2.67 with a chance to fill the gap at $2.58.  This anticipated dip should be short lived, so keep on your toes if you are active.

Summary

Watch the key levels and the volume around those levels.