We have a new week to look forward to with SiriusXM (NASDAQ:SIRI) and a new quandary to consider. What does it mean when an equity has great volume but fails to take out a resistance point? With SiriusXM that is exactly what happened today. Volume returned to the equity, which was great, but the volume did not take SiriusXM to a new level. Instead, it reinforced a battleground. There are many things to consider, so let's hop right in.
High volume is something that we love to see. The trick with SiriusXM lately has been where that volume is coming from. With Liberty Media possibly buying up shares, it could offer an explanation. The failure of this equity to make a run on volume this substantial has me scratching my head.
Essentially SiriusXM spent the bulk of the day fighting between $2.53 and $2.54, with weakness at the end of the trading session, and then a spike to close at $2.54. High volume typically indicates strength in a move, but this was high volume in a very narrow range. It was almost as if there was controlled activity happening. Perhaps we can garner some additional information by looking at the other technical indicators.
Support and Resistance
We begin to see some more clarity here, but not as much as we would like to see. I had previously noted that support at $2.50 was weak. The fact that this equity stayed above that level on substantial volume gives me reason to strengthen that support from a level 1 to a level 3. Bear in mind that many technical sites do not even have $2.50 in the equation. I have not yet raised the strength of resistance at $2.56, but I will say it is tempting to do so. Another day may offer more clarity.
What we seem to have here is the battle shaping up at levels between $2.50 and $2.56. The high volume cam in as a surprise, and we can not discount the meaning of it. The equity may not be adrift at this point. Last week I had spoken to the very distinct possibility that SiriusXM could test down to the next real support level at $2.40. That is still possible, but now we have a new level of strength at $2.50. That adds a layer of protection now that was not in the cards last week. It could serve to bring the downside risk upward. What we want to watch for is how the volume tomorrow interacts with the $2.50 level and the $2.56 level.
Exponential Moving Averages
SiriusXM has had an uncanny ability to walk a fine technical line. You have to give this equity credit for holding the line! From an EMA standpoint a close of $2.54 or better was important and SiriusXM accomplished just that. The close at $2.54 allowed the 5 cent gap between the 5 day and 13 day averages to remain. However, we did lose a penny between the 13 day and 20 day. That gap now sits at 6 cents.
The fact that some of these gaps are closing is the caution side of this equation. The fact that SiriusXM is keeping sturdy is the positive side. What we need to see is SiriusXM hold the $2.54 line again. If it can do that tomorrow, it could give reason to take some cautions out of the equation.
We want to see if the volume exhibited today is real, and if it is real, if it can break through $2.56. If SiriusXM can accomplish that, it will set the stage for a move to $2.60. Such a move can even happen in one day if volume is strong enough. The immediate downside level to watch is now $2.50 as an added layer of protection from a dip to $2.40. It should be an interesting few days watching SiriusXM.