Sirius XM Holds Up Well After Russell Rebalance

By Brandon Matthews

If my inbox Saturday morning can be used as a barometer of market sentiment, the headline of this article alone should have people scratching their heads in disbelief. Let me explain. I first alerted Satwaves readers about the upcoming Russell rebalancing on June 15. On that date, Sirius XM (SIRI) closed at .33 a share. I was concerned at that point because the re-balancing at that price could have easily taken the stock to the low .20’s.

Sirius XM began to make some moves including the launch of its Apple (AAPL) iPhone app, which in just 12 hours became the most popular music download at Apple’s iTunes store. Upgrades ensued and the company was able to refinance a great deal of its debt at a much lower interest rate. All of this led to a rise in SIRI shares to the mid .40’s..

I was asked Friday if I would be trading SIRI on the Russell news or if I would stay long. I decided to stay long and stated that the worst I foresee is the stock being taken down to .35. It closed at .36. For a stock that had been living in and around .34 for the better part of four months, that’s a much better scenario than the .22 it could have found itself under the circumstances of just two weeks ago.

In after hours, the stock managed to regain a foothold above .40 again, most likely due to short sellers using the index re-balancing to cover their short positions. Sirius XM investors should be elated and relieved. My mailbox tells me otherwise! In the end, the stock is holding ab0ve key technical support. I can assure you that despite the fall and subsequent rise, no retail trader had any hope of trading that swing. Although some stop losses may have been triggered, the end of day action probably means that few if any of those trades were actually executed.

Looking ahead to Monday, it is likely that the market will continue to function as it has been. The market makers have a lot of shares to sell now that they purchased for .36. I find it highly unlikely that they would sell those shares for less, which bodes well for Sirius XM as we enter a week with quarterly auto sales data on deck. Good news on the automotive front should spur demand, which will begin to lighten the load of shares that the MM’s now find themselves burdened with.

Position: Long SIRI

Comments

[R A F:]

The Russell rebalancing is a short term phenomenon causing temporary turbulence. Once this short term imbalance in supply is digested the longer term fundamental and technical influences should remain dominant - and they are all positive on balance, for reasons Brandon has noted above. It is important to evaluate how the stock holds on pullbacks - in a technically strong framework, pullbacks meet increasingly strong support as prices decline and recoveries resume once this support is verified. All of this was seen late Friday, reinforcing the perception of a technically strong framework for SIRI. This, in turn, sustains the projection of $1.00+ over the next six months to one year.

Jun 28 08:33 AM

[patito:]

Technically speaking I think that SIRIUS has a target around 1.50 area.

But, the trigger for a big move was holding over 0.465. That why 4 minutes before the close us it was at 0.46, short sellers pushed the stock down, knowing where were the stop loss located.

If SIRIUS manage to close over 0.465, next target would be at 0.575. Now it has Near Medium and Long Term Momentum converging to the upside.

So unless short sellers use the last minutes of trading...during the session every sell on the stock is a big opportunity for adding positions.

I agree that 0.35 is a BIG one. But, it was last week when the Near Term was pushing to the downside, along with the market.

But Nasdaq Momentum is heading higher now, as well as SIRIUS (SIRI), so...It would be better to think that 0.465 is more likely to see than 0.35.

If the week starts with lower US DOLLAR INDEX below 80, and GOLD over 940...the markets have big potential to move higher and push over the highs of this year.

Nothing is casual in the markets, and the last minutes of trade in (SIRI) are no the exception. SIRIUS chart is one of the best one nowadays. If you analize it I wouldn't hesitate to buy (SIRI), is one of the best. And has a huge volume everyday.

Jun 28 02:20 PM

[GeorgeS:]

You may have the right answer patito. Hard to believe that the Russell affect could happen this way. You think the shorts made it come down from 45 to where sell triggers took care of the rest, just so shorters could get their money for the day?

On Jun 28 02:20 PM patito wrote:

> Technically speaking I think that SIRIUS has a target around 1.50
> area.
>
> But, the trigger for a big move was holding over 0.465. That why
> 4 minutes before the close us it was at 0.46, short sellers pushed
> the stock down, knowing where were the stop loss located.
>
> If SIRIUS manage to close over 0.465, next target would be at 0.575.
> Now it has Near Medium and Long Term Momentum converging to the upside.
>
>
> So unless short sellers use the last minutes of trading...during
> the session every sell on the stock is a big opportunity for adding
> positions.
>
> I agree that 0.35 is a BIG one. But, it was last week when the Near
> Term was pushing to the downside, along with the market.
>
> But Nasdaq Momentum is heading higher now, as well as SIRIUS (seekingalpha.com/symbo...),
> so...It would be better to think that 0.465 is more likely to see
> than 0.35.
>
> If the week starts with lower US DOLLAR INDEX below 80, and GOLD
> over 940...the markets have big potential to move higher and push
> over the highs of this year.
>
> Nothing is casual in the markets, and the last minutes of trade in
> (seekingalpha.com/symbo...) are no the exception. SIRIUS
> chart is one of the best one nowadays. If you analize it I wouldn't
> hesitate to buy (seekingalpha.com/symbo...), is one of
> the best. And has a huge volume everyday.

Jul 03 06:44 AM