With the recent run up many Sirius XM (NASDAQ:SIRI) investors had visions of $2.25 or even $2.50 and more in their hearts and minds.  It was a level that was seen only a couple of months ago, and if Liberty Media is making a move, certainly the equity will appreciate… right?

Well, this is the stock market.  The dreams of a big push are indeed possible, but so is a bit of a break and cooling off period.  After all, there is still a lot of uncertainty regarding Liberty Media (NASDAQ:LMCA) as well as the FCC decision on de facto control.  Now is the perfect time to assess the situation, gauge the likelihood of moves, and plan strategy.

From a technical standpoint we have some interesting dynamics in the short, intermediate, as well as longer terms.  While there are indeed technical indicators that are bullish, I would paint the overall technical picture as neutral.  My favorite indicators, volume, support and resistance levels and Exponential Moving Averages (EMA’s) seem to carry a bit of conflict, adding to my stance that at least in the shorter term things with Sirius XM are in a sort of cruise control mode.

Last Friday we had a nice day, but it happened on lighter volume than the previous days that supported the recent run up in share price.  Today we had the company offer up great subscriber numbers, as well as increased 2012 guidance in both the subscriber and revenue categories.  All would seem right with the world except for the fact that volume is lighter than I would like to see and the equity is only seeing a pop of a couple of cents.  Lets look at support and resistance:

  • $1.91 – Very Strong Support
  • $1.97 – Very Weak Support
  • $2.03 – Moderately Strong Support
  • $2.10 – Moderately Strong Resistance
  • $2.16 – Moderately Strong Resistance
  • $2.20 – Moderately Weak Resistance
  • $2.26 – Moderately Strong Resistance

As you can see, Sirius XM is trading right in between two levels of moderate strength.  The easy call is to say things could go either way.  It would certainly guarantee a correct call, but that is not where money is made.  Because the volume seems to be lightening up, my initial reaction is that from a technical standpoint drifting down toward $2 is a distinct possibility.  Had there been more volume today I would lean toward testing the $2.10 level.  The key here is looking for confirmation of a new leg up, or confirmation of an equity in neutral.  For me, at this point, that confirmation is indicated in volume.

The good news is that support at $1.91 is strong.  The better news is that resistance at $2.10 and $2.16 is weakening.  The bad news is that $1.91 is about an 8% drop, while $2.16 is about a 5% gain.  I would venture to say that a close below $2 in the next week or so would almost guarantee a trip to $1.91.  Meanwhile, a close above $2.10 brings immediate upside to $2.16.  At this moment, in the short term, Sirius XM carries a higher risk than reward.

Shifting to the intermediate term, we have what looks to be a very good quarterly report coming out.  We have seen a positive development in the subscriber picture as well as the revenue story.  The question at hand now is how the price increase is impacting the Average Revenue Per User (ARPU).  With the company raising revenue guidance, it would appear that the price increase is beginning to filter to the bottom line.  Again, a good sign.  In my opinion the Intermediate term looks pretty good for satellite radio.  The same can be said for the longer term.  What we need to see at this point is some initial feelings from management on what 2013 might deliver.  That is the guidance we want to focus on for the longer term.  If Sirius XM can grow Adjusted EBITDA from $875 million in 2012 to $1 billion, it would indicate growth of just under 20% and be attractive to investors and the street.

Looking at the Exponential Moving Averages takes us a step deeper into the world of the technical situation.  Indicators are very bullish in the short term, bullish in the intermediate, and neutral in the longer term.  That is the easy part.  The hard part is predicting the all important cross-overs that deliver EMA sentiment.  The 5, 13, 20, and 50 day moving averages are all within 6 cents of each other.  The goal for a bullish signal is the nearer terms averages being above the longer term averages in succession.