A New Sirius Trading Theory

Once again, I am going to put myself "out there" to be judged and crucified again. At this point, I believe that is what is expected of me. Like staring at an E.K.G. readout, watching a stock chart all day can be quite boring to most people, especially one that just repeats in a sideways pattern. A cardiologist can decipher even the tiniest nuances of an E.K.G. Likewise, on occasion, a stock chart can seem unusually erratic in nature to the trained eye. Last week as Sirius XM (SIRI) reported its net subscriber loss, a take-down occurred in which an extraordinary event took place.

I had noticed that 100 million shares were exchanged in a single transaction, yet this trade did nothing to affect the overall volume of shares reported for the stock. Several members of the Satwaves forums witnessed this, and it was discussed throughout the day. This "exchange" was reported at 40 cents a share. It seemed more of a share borrow agreement between market makers than a bona fide transaction. Monday's close brought with it very similar action, except that more than one market maker was vying for an outrageous number of shares at the close...again bid at 40 cents a share.

Despite a massive negative media attack Monday, millions of shares sat on the bid at .40 and never filled. It seems to me that several market makers who deal in SIRI common stock are in fact running out of shares. In my opinion, the market makers are lacking shares to fill those buy orders. The negative media blitz which included blatant errors in some cases, had little effect in shaking loose enough weak hands to fill the needed orders.

The Motley Fool once wrote:

If the set price is too low, there will be more buyers than sellers and the market maker will run out of shares. So what is to be done then? Obviously, the price will have to be raised, discouraging some buyers and enticing more sellers until demand and supply balance once again.

I did not want to jump the gun as it were with regards to this theory, as it is in fact a completely new concept to me. I have been watching for months, however, as the market makers have filled buy side orders from inventory while completely ignoring the sell side of the market, instead stepping in front of actual sellers with lower offers. I have felt that this activity could not continue indefinitely.

Perhaps these market makers expected a larger sell off of Sirius XM shares than was realized. Perhaps, people invested in Sirius XM have been through the proverbial ringer and simply will no longer budge. All of this speculation was just that, until I read an article from Gino Lattarulo describing "suspiciously high" Sirius XM open interest in the options market. Gino mentioned that a catalyst for such a precipitous rise was missing. Perhaps I have just found it.

Position: Long SIRI

Comments

[Play:]

Siri's price movement yesterday looked a little too controlled. When Siri can go for minutes with a high/low of less than $0.0001, it seems odd. When the days H/L is exactly $0.4300 and low is $0.4000, the appearance is of massive price control.

May 12 08:20 AM

[Vince$:]

I admittedly know very little about the stock market, but I was just watching for Sirius for long periods of time yesterday and it looked stuck or frozen. Had no idea what it meant.

May 12 08:50 AM

[1more4me:]

Brandon, excellent observation. This kind of info is way more helpful than reiterations and re-explanations of interpretations of the same old thing weve been seeing lately. I bet there is 25 different articles out there in the last week discussing sub numbers. What's better news to me is the fact that there are that many folks all the sudden back in the game of writting and reporting on SIRI. Coverage bound to increase it's popularity. But no worries- No matter how many new clowns enter the SIRI circus -You and Tyler both have been there for the long haul and have been vital to my strategies. What I keep thinking on the volume issue and Jan options intrest is that there may be a couple big hedge players resetting from short to long or setting up for a major a long play??? Time will tell- and I'll be here. Long SIRI- PEACE

May 12 10:42 AM

[fpcat1:]

the popular knowledge on stock movements are - either up, down or sideways. to this, we can add none or frozen because of siri share price phenomenon..

a company with so much potential to have its share price virtually immobilized at a very low value clearly indicates that it is being maliciously manipulated.

May 12 11:01 AM

[jmsithy:]

this stock has always been at .38 since about 4 weeks ago / never be fooled if it goes beyond .38 for now / forget that it went up to .50 twice use the model when it was at .13 it went to .19 about 4 to 5 times before it evn broke .20 / Until any Real news comes out this stock wont see above .50

May 12 12:50 PM