By Brandon Matthews
In premarket action Friday, shares of Sirius XM Radio (Nasdaq: SIRI) were once again trading above the one dollar threshold, hitting an early high of $1.06. The psychological benchmark is important to many traders and investors for a multitude of reasons, the most notable of which is that it can potentially be the start of a new compliance run with the Nasdaq and alleviate any remaining fear and doubt surrounding the company.
Some may question the sustainability of this run, yet the charts indicate plenty of upside still to come. Just Wednesday, I wrote an article highlighting the bullish triangle pattern that was in the process of confirming at 89 cents, and suggested that SIRI shares could run to the $1.20-1.25 range. Things seem to be moving in that direction quite nicely.
Following that article, Sirius XM shares surged Wednesday on historic volume of over 600 million shares. As yet, there has been no news other than the announced intent of Liberty Media (Nasdaq:LMDIA) by the Justice Department to apparently increase its equity stake in the Satellite Radio provider. A filing could be imminent, and will be looked upon as the ultimate insider purchase which will suggest to bears that a future tender offer may be forthcoming.
Short sellers are being held in check, as news of a large purchase by Liberty ahead of earnings results will be viewed as bullish. They are not called bears for nothing. The scent of food and signs of weakness bring the bears out of the woods in droves. Typically, when volume drops in Sirius XM, the bears attempt to sell the tops of rallies. Thursday, Sirius XM volume dried up at about two o’clock in the afternoon, yet the bears, as if smelling a trap, steered clear. Clearly they too are expecting some kind of news.
With the bears held in check, and the bulls free to accumulate SIRI shares ahead of any announcement, Sirius XM is poised to succeed in its quest for regained compliance. Institutional purchasing as we witnessed a month ago may begin in earnest once the one dollar floor has been established.
Disclosure: Long SIRI