Sirius XM: What’s Going On With The Stock? Part 1
Recently Mel Karmazin made a statement that he couldn’t control the stock, only the company. And he is right. Stock prices are dictated by the law of supply and demand. If there are more buyers than sellers, the price goes up; more sellers than buyers and the price goes down. It really is that simple.
It is out of this simplicity that technical analysis was created. Ironically, many technical charting tools can be so complicated that they bewilder individual investors. They can also give false signals because they react to every tick. One of the most simple and accurate types of technical analysis is point and figure charting. It’s a simple system that takes out of the equation day to day fluctuations and paints a clear picture of the trend of any given equity. This is a system anyone can learn and it does not even require a computer. A sheet of graph paper is all you need. In fact, Dorsey, Wright & Associates introduced me to point & figure charting many years ago and they offer a free charting tutorial on their website.
For long term investing there is no better way of understanding the stocks in your portfolio. I have created a small chart below that represents the activity of Sirius XM stock for the month of August. I have also abandoned the standard box size because Sirius would have to rise to 3.00 to indicate a positive trend reversal, and we would miss out on over a 100% gain by the time we realized it.
The number 8 represents the month. O’s are downward movements. X’s are upward movements. Clearly we can see that the stock bottomed and held at 1.30 on 3 separate occasions. Today we ran into resistance at 1.49. Looking at this chart makes it clear that resistance would be found at 1.49, before it ever occurred.
My best guess is that we may trade within this range for the next few weeks. By viewing it in this manner an investor is better able to identify tops and bottoms, and makes any potential negative reversals less intimidating. The key to it is that it requires a 3 point reversal to change the direction on the chart. The trading range is so tight here, that a reversal to 1.30 would be required to change the direction of the chart. Longs will want to see the stock hit 1.50, as this would indicate a positive breakout. Shorts would want to see 1.25, as this would certainly be a sign of further losses.
We seem to have an established bottom, and as of today an established top. I hope I have made this as simple to understand as possible. I will be available to answer any questions regarding any of this on the SiriusBuzz forums.
Now the question becomes; Will supply or demand win out in this epic battle? Stay tuned! And get charting!
8<— August 1, 2008………………1.65
O……………………………………..1.60
O……………………………………..1.55
O…X…………………………………1.50 (Reaching 1.50 would be a double top breakout)
O…X…O…X……..X……<——-……1.49 This is a double top at 1.45, indicating resistance to 1.50
O…X…O…X…O…X ……………..1.40
O…X…O…X…O…X………………1.35
O……..O……..O…………………..1.30 This is a triple bottom, indicating support (3 o’s)
……………………………………….1.25 (Reversing to 1.25 would be a triple bottom breakout)
Brandon,
Are you just showing 1.55, 160, 1.65 as an example or are these real resistences ?
I seem to remember 1.80 being big since it hit that pre-merger approval, then ran up to 2.68 (higher pre-market following day to ~ 2.80), then plunged through 1.80 on the merger approval and convertible bond offering.
Recently Mel Karmazin made a statement that he couldn’t control the stock, only the company. (so, the impact of death-spiral-financing on the company doesn’t effect the price of the common shares?)
Stock prices are dictated by the law of supply and demand. (which of course has no relationship to management decisions and thus the share price?)
Stock prices are dictated by the law of supply and demand. If there are more buyers than sellers, the price goes up; more sellers than buyers and the price goes down. It really is that simple. (and of course the 400mm shares loaned for hedge-fund shorting would have no impact on that supply & demand relationship?)
Rhetorical Question: If the Amazing Karmazin were to announce his immediate resignation, would the share price change?
So much for his inability to control the price of the stock. I can’t think of a single other publicly traded company in which the shareholders have so much “franchise value” invested in the CEO . . .
roadkill
I fail to see how your mel bashing agenda has anything at all to do with the subject matter of the article. Why don’t you write Mel about your issues instead of disrupting all posts made on these forums. I for one am getting tired of your constant complaining and use of MY ARTICLES as your grudge platform.
Why don’t you put a thought together, put it on paper, and get it published.
Investor:
That is the actual activity this month. I used a 5 cent box size because of the low pps, to guage the current supply and demand battle…
Those prices are just the scale….not resistance. The resistance is at 1.50….as proven by todays activity.
Should it break 1.50, I will provide a larger scale chart in the forum thread…
The standard chart would show no movement to speak of. It’s like I zoomed in to get a better picture.
I have noticed that price increases that build on low volume without news usually indicate that short are building their positions for a big drop.
Is there anything to this, the way to pick up the pattern and get out of the way in time ?
We all know that the reason the stock is at this price is because of manipulation. I know it’s the classic excuse for bagholding longs, but the recent witholding of trades above the closing price until after the close can’t make it more obvious that market makers have a lot at stake in seeing SIRI hit rock bottom. Trying to apply technical analysis to SIRI at this point is as good as useing a dartboard and blindfold to predict direction.
Sirius Roadkill:
You need to keep with the topic of the blog and advise you focus your Mel bashing comments on yahoo’s message board.
Even though I agree that price points and resistance levels exist, I think that as new offerings (both “best of” and new hardware) are announced after Labor Day, we will, hopefully, see some pops upward in the stock price. After all, this is not like a regular company that offers a standard product over a long period of time. I think people will see subscibing to XM differently if it has Howard Stern available, with similar different views toward subscribing to Sirius with its expanded offerings. It is my hope that some of the public will see Sirius XM after some changes as a “new” product, differentiated in a noticeable way from each of the individual companies. Also, because of the silence necessitated by the long road to merging, I think publicity in the upcoming holiday season will drive this “new” company. Let’s hope!
Ok, sure Sailboat. will do . . . when the endless Mel cheerleader posts move over to the Yahoo boards I’ll move over there too.
The posted article by Brandon Matthews relates to Mel’s inability to control share price. My post simply refutes that assertion through illustration. Mel IS management and must be part of the rebuttal, no?
Over the past few days we have now learned at the knee of Mr. Matthews that the “debt issue is a non-issue” and that management cannot control share price. Shall we allow such inane assertions to go unrefuted?
I hope that others reading this post will note the concerted effort by some to sanitize my remarks about management.
No roadkill..
Mel made that statement himself in a televised interview. This article is simply about the trading range the stock is in and gives a game plan for understanding it.
It is an article about the technical aspects of the stock and you want to bring fundamental analysis and Mel bashing into the mix to confuse and distort the article.
There is a forum in which you can post topics such as these but the comment section of an article with your off topic rants is unacceptable.
I am always open to debate and the forums provide a place for such discussions.
I again suggest that because you seem to have a personal grudge to settle, that you go to blogger.com and start your very own Mel bashing blog.
Brandon, I think understanding “where the stock is currently, related to where it has been historically is very useful for short term investors looking to trade the “channel”, or “Long” term investors, looking for good price points to dollar cost average in. Using your information or trading analysis, combined with company specific news and events, fine tunes this technique. So thanks for taking the time to define it as it relates to SIRI.
There are some very mature industries and companies within these industries that have years of cyclical price point history that make “channel” trading utilizing technical analysis very profitable. I’m not sure that Sirius has a significant enough history for us to apply it with any degree of confidence, but the channel does seam to be forming, unless news, company or world events change it.
One technical indicator that is very reliable at spotting major trend reversals is MACD, in particular when it is signalling a bullish divergence with price. This means that a line drawn between the relative lows/bottoms of the price chart between late June and now is pointed downward whereas a similar line drawn between the MACD cross-overs occuring over the same time frame is flat. So, they are diverging from each other i.e. not pointing in the same general direction. There is much on the internet to explain and illustrate this principal.
Brandon,
What do you think about the link below whch claims a BREAKOUT has already been CONFIRMED above 1.45, no resistance in area just above.
BREAKOUT CONFIRMED breakout above 1.45, no resistance in area just above.
When Mel said he controlled the company and not the stock, he wasn’t suggesting he has no impact on the stock. He was merely pointing out he doesn’t dictate the price the stock is trading at, the market does. The best he can do is improve the bottom line and trust the stock price will sort itself out. For him to say he directly controls the stock price would be actually tantamount to manipulation. Wienkes on the other hand does seem to be actively manipulating this stock and should be slapped with a class-action lawsuit. He recently claimed that his $1 price tag was generous and the stock was really only worth $.45. Yahoo is trading at $20. Would an analyst get away with explaining a $40 price target as an act of generosity? Why is he being generous? Is that what he’s paid to do? Issue research notes that are off by over a 100%? The only reason, I think, is because the street would have completely dismissed a $.45 price and him with it. Truth is, in a bear market, bearish calls gain a lot more traction than they deserve and Wienkes apparently has an axe to ground. I think a class action lawsuit against GS and Wienkes is exactly up Michael Hartleib’s alley. Go for it Michael!
I’ve never seen a stock with such promise get beaten down so much.
But now after the INSANE merger delay and UGLY refinancing Mel had to do to close the deal…but MOSTLY because this stock has such negative history attached to it…the shorts will continue to rule and this stock won’t move UNTIL profits are shoved in the face of wall street and can’t be denied.
We have a long way to go for that. Yes…good news will keep coming out…and ANY OTHER stock would MOVE UP on such news…but until Sirius XM radio PROVES it is profitable…the stock will continue to go nowhere.
If you are LONG…you have to take that word LITERALLY. Tyler is right, it’s NOT going to happen overnight.
HOPE and EXPECTATION are SO defeating when they don’t pan out…and Sirius shareholders have been HAMMERED with years of HYPE and HOPES that were dashed.
You can only go thru that so many times before it CRUSHES your spirit.
BUt the lesson learned, especially with this stock, is that there is NO SURE THING. This is a loved product with a great future. All you have to do is adjust your expectations. Stop clinging to the hype. Stay AWAY from the Yahoo message boards. Don’t sit in front of your computer WAITING for the POP.
This is officially a long term play now. So if you have a TON of shares invested in the company. Just walk away…and focus on other things.
We sat in front of the computer for 18 months with our finger on the sell button as we waited for the merger to go thru. It nearly killed us mentally and emotionally.
DONT DO THAT ANYMORE. Life is too short.
I wonder if it is as simple as the “big boys” just want to get the price down to a $1 so they can have the bragging rights to say “I got Siri for a buck… and now it’s at $20. I used to think that they just wanted to get it down to $2 when it was trading around $2.50 for the same reason. Until profitability comes “they” can come up with some kind of bogus reason why that dollar price would be justified… Just long enough for them to load into the elevator at the bottom floor.
Brandon – thanks for the insight. interesting to see what is instore for Monday’s trading. Will we break the 1.50 level. Since the merger I have done my part in getting additional subscribers. I am curious to see if other investors or supports of siris xm hace done the same. I have also noticed that each time I have gone to Best Buy to buy additional radios for friends and family that there are many others doing the same in the store. Has anyone else noticed additional activity in stores in there area. I am on Long Island, NY.
Forget about charts, technicals and all the other bs. This stock is under attack and heavily manipulated. This pure classic manipulation and I think Mel made that clear when he was on Cramer. What he should be doing is what the CEO of Overstock is doing….Fighting back.
Brandon I’m a CHART PRO please have a look at this > www bigcharts com use advanced chart Time frame: 1Month by Daily. Indicators: use MACD indicator,Slow stochastics & Money flow. Chart style use Candle stick.
You will see MACD indicator is about to cross over = BUY SIGNAL with Money flow moving in & slow stochatics turning up.
NEXT WEEK I’m 100% sure this stock trades in the mid to high $1.50’s stock is headed to $1.75 with next 10 TO 15 trading days.
I have been trading for 11 years I average 200%+ a year and mangage a private wealth fund.
chartpro:
Agree 100% and posted similar commentary this morning but moderators decided not to publish. A short term breakout is inevetable in the next 10 trading days.
Sailboat…
Where did you try to publish this commentary? I have not censored any of your posts here on SiriusBuzz.
Tried 2 times again Brandon. The post has a link which might not be allowed.
By no means am I a technical trader, but have found the MACD is the most valuable tool to spot trends and anticipate direction. Take a look at the MACD from June, set to 26/12/9 which is Yahoo’s default settings.
http://finance.yahoo.com/echar.....=undefined
A cross between the 26 and 12 has occurred on Friday, corresponding to an uptick in the pps, but we all can agree that we don’t need a chart to realize the price has increased over the last few days.
Overbought and Oversold conditions show as divergence between the 12 and 26 EMA (RED and BLUE lines). You can see the overbought condition by the spike around July 24th @ $2.75 by maximum divergence confirming the overbought condition and the rapid reversal as the divergence crossed the other way around indicating an oversold condition on August 8th @ 1.32 , which by the way was my entry point, not to rub it in, just being in the right place at the right time. At first glance you would think that you don’t need a chart to realize this, but these lines don’t move sharply and crossing represents the short term trend of the pps in definately up..
For me, another good indicator is the MFI (money flow index). Which represents positive and negative (BUY and SELL) cash flows. Equalibrium is a value of 50, selling will drop the value, buying will raise the value. SIRI has a lot of “false starts” during the last few months, showing MFI wanted to rise off it’s lower levels but was shorted back down. IMHO those days are over and it’s too risky to short anything but a 30% price pop in a single day. There is also a tremendous amount of shares shorted under $2.00 so a positive press announcement associated with the TA could cause a nice mini squeeze by Labor day sending the pps well above the $2.00 range.
I trade as a hobby and my knowledge of TA is just enough to be considered dangerous and by no means am an expert, so don’t go buying this stock on what I say. The more I look into SIRI the less I want to swing trade it and just go long and hold my shares for a few years.
The problem with MACD is that it is a lagging indicator and does not work well with volatile stocks. Sirius is one such highly volatile stock.
Brandon:
Let’s see how this pans out. My prediction based on TA is a close somewhere around 1.60 on August 22nd, and 1.80 on the 29th. Where it goes after Mel’s come to Jesus meeting is anyone’s guess.. Good Luck Buddy… :-}
Every penny SIRI goes up the big money will be shorting to protect their principle in the convertible bond market. I am buying more shares next year after the second offering of convertible notes. Perhaps I am foolish but I still believe in the stock as a long term investment.