One of the more interesting things in following SiriusXM from a technical standpoint very closely is how you can become pretty adept at outlining potential situations and assigning a likelihood to these things happening.  When I call for SiriusXM to correct, I tend to get flogged by the SiriusXM faithful, but I am in a unique situation that allows me to separate myself and my emotions from the company.  This gives me the ability to keep an open mind, be bullish when it calls for it, and bearish when the time is right.  Emotions and the stock market do not typically work well together.  One key to better trading is developing the ability to read the market and understand the boundaries.

Right now the boundaries for SiriusXM are pretty simple.  To the downside we have $2.27.  To the upside we have $2.54.  The way I play this is that any trading within this range should be considered “normal” and not change the overall dynamic of the equity.  Yes, if SiriusXM were to dip down to $2.27 it would warrant attention and analysis, but in and of itself, trading at that level is actually within what I would term as normal limits.  One thing traders look for is a range in those limits that the company seems to gravitate toward.

One popular trend out there is that Liberty Media’s interests align with SiriusXM.  The logic seems okay until you peel back a few layers of the onion.  Yes, I get the idea that Liberty wants to see its investment grow.  We all do.  However, the most valuable thing to Liberty Media could well be the tax free spin.  That is correct, and investors should never forget this.  Liberty has a massive gain worth BILLIONs that make the open market purchases look small.

Volume

SiriusXM closed down on lighter than average volume.  This is good in the sense that the company did not go racing through support at $2.40.  What is bad is that SiriusXM closed at $2.39, so a test of support just below is probably likely, and perhaps even a test of $2.27.    Sirius XM traded on just above average volume.  This would indicate that there is some level of comfort at these levels, and perhaps a market with buyers and sellers in plavce in sufficient numbers to create decent volume.

It should be noted that the higher volume today was in the later half of the session, when the equity was testing lows.  This is important because it is a clue as to the trend.  We will know a bottom approaches when volume lightens up on SiriusXM.  Until then, my warning is continued probes of lower levels on moderate to average volume.

Support and Resistance

There are a few key developments with today’s session.  The strong resistance at $2.50 has now been split.  We now have moderate resistance at $2.47 and strong resistance at $2.54.  The good news is that the next hurdle up is not as high.  The bad news is that we have a moderately high hurdle just above $2.50.  Investors need to note the weakness of support at $2.37.  That can get tested and even broken with relative ease.  You should be prepared for a test of $2.27.

With SiriusXM trading into the $2.30’s, warning flags should be popping up.  I should stress that overall I still remain bullish on SiriusXM, but this short term correction has been in the making for quite some time, and despite how frustrating it is, it is healthy.  Looking for a trade or an entry point?  If you are you should be paying close attention to the technicals.

Exponential Moving Averages – EMA’s 

The EMA’s have thrown up a second danger flag, and the short term outlook for SiriusXM is very bearish.  This does not mean we are looking at a trip to the $1.80’s.  It means that the trending is down in the short term.  Those that have followed along for a while now saw this coming.  What I want readers to notice is how tight many of the EMA’s are, and how much room there is between the 20 day EMA and 50 day EMA.  That is the one you want to focus on now.  If that wiggle room begins to narrow, you should take note.  This gets real interesting if SiriusXM tests $2.27.

If I had to make a call it would be that SiriusXM is more likely to test $2.27 before it tests $2.54.  As an investor you can see the data, see the trends, and see the action.  What does it tell you?  Here are some keys to look at.  The 5 day average is now below the 13 and 20.    It would take a close of $2.52 to bring it back above both of those other averages.  While possible, it is not likely unless we get compelling news.  The next thing to look at is how close the 13 day is to dropping below the 20.  A close down in the $2.30’s again tomorrow might make another danger flag appear.  Rather than looking at hope, look at the numbers.  There is an easier technical path to bearishness than to bullishness.

Summary 

While what I see may not be popular, it is what it is.  Simply stated I see a very real potential that $2.27 will get tested.  The good news is that the average share price Liberty has paid for its common stock is about $2.26 per share.  Liberty has every reason to want this above that level, and if they have any room left to buy more shares, it would make sense for them to prop the price here.  Watch out for compelling news.  It could reverse the trend.  Be watchful and be ready.