Earlier in the week I wrote a technical analysis piece titled "Is $1.83 The Next Step For Sirius XM?" As it happens, Sirius XM (SIRI) closed at exactly $1.83 today, testing that level of support and even breaking it briefly. With that news now in hand, it is time to consider the possibilities of what will happen next.
The first thing I would like to touch on is the volume. Sirius XM went down to $1.83 on huge volume of over 170 million shares traded vs. an average volume of 60 million. In my opinion, a lot of this volume may be attributable to Liberty Media (LMCA) and its quest for control of the satellite radio provider. As of this writing, no new SEC forms have been filed by Liberty Media, but we could see some activity on May 18.
With a stock price of $1.83 now in the books, we need to look at what could transpire next. The first step is looking at levels of support and resistance. I like to look two levels in each direction so I can gauge what could transpire from a technical standpoint ahead of the curve. The next level of support is $1.70 and is rather weak. Below that we have $1.58, which is somewhat stronger. Fellow Seeking Alpha contributor Jeff Pierce of Zen Trader calls the next support bellow the current range at about $1.50. Either way, investors will want to consider these levels as they tune into this equity.
Resistance levels now sit with a weak level at about $2.02 and another weak step at about $2.10. Both of these levels are below the recent Liberty Media 60 million share purchase at about $2.13, and the share price on its forward contract for 302 million shares at $2.15.
There are a lot of moving parts here, and news surrounding Liberty Media and its dance with Sirius XM may trump technical indicators in the short term. If Liberty Media was indeed able to acquire more shares prior to the Sirius XM annual meeting May 22, it could provide for some overwhelming news flow and, perhaps, a very memorable Sirius XM shareholder meeting in New York.
Absent news during the trading session on Friday, May 18, I see a distinct possibility that Sirius XM will test the weak $1.70 support level. While this type of news is frustrating for longs in the stock, it could provide even more impressive entry points in a company that will be showing the Street impressive revenue numbers and EBITDA growth throughout 2012.