It's been an exciting couple of days for those who have held on to their Sirius XM (NASDAQ:SIRI) shares. With a sharp rise on Tuesday of 7 cents, followed by a Wednesday which showed shares holding strong and ultimately gaining another penny, those who are long Sirius XM have something to be excited about.
So the question on everyone's mind, longs, shorts, and those waiting in cash such as myself, is where are we headed from here?
If you came here looking for an answer of up, or down, all I can say to you in that regard is "yes." The problem? There are so many things going on with both the company and the stock right now that it makes it difficult to put a finger on which way the stock will go in the short term.
Consider the larger picture at the moment. Sirius XM is currently in the middle of a battle with Liberty Media (LMCA) over Liberty's attempt to gain control of the company. While I ultimately feel that the destination is locked, and that Liberty will gain its control, the journey is uncertain for the short term. And that may very well be "very short term" as Liberty is set to close on its forward contract for Sirius XM shares on July 6th at the close of trading, and settle on July 11th. That's 11 business days from now to closing, and 14 to settle date, folks. Throw the Fourth of July holiday in there for good measure and you shave 1 trading day off those totals. Unless you feel Liberty is going to close and sit on their thumbs, then this date should set off a bit of an alarm in your head.
Expect another forward contract, for enough shares to take Liberty to de jure control. I can't see a situation where Liberty does not go to over a 50% stake in Sirius XM. With Liberty's forward contract set at $2.15 per share plus fees, Liberty obviously sees value in Sirius XM at least at the $2.15 level, which is around 12% above Wednesday's close, and with fees it could be as much as 20%. Fellow author Crunching Numbers had a nice article on this. So much for Liberty not paying a premium ... clearly Liberty is paying a significant premium over market price.
But what of the time from now until then? What of the next few weeks of trading? While I love the recent rise, and while I almost jumped back in today as the share price showed support at the 20 day simple moving average at $1.89, I'm still not convinced from a technical standpoint. Something gave me pause. Take a look at the following chart.
Notice the blue and red lines. These are 50 day and 200 day exponential moving averages. These lines track the average price of a stock over their respective periods, with a bit heavier weight given to more recent prices.
There are two "crosses" which can occur.
When the shorter term average crosses above the longer term average, this is viewed by technical traders as quite favorable and called a golden cross. You can see the chart for Sirius XM above, where the golden cross earlier this year signaled a bullish trend which took the stock up some 60 cents before fizzling out.
The reverse comes when the short term moving average crosses below the long term moving average. This is often referred to as a death cross. As you can see on the chart for Sirius XM above, on Wednesday, the two moving averages converged at $2, and without a massive rally for the stock on Thursday this death cross will complete.
Though these crosses do not always cause behavior in stock prices, this does give me pause. With what I feel is currently a dead zone of news from now until Liberty completes their forward contract, I see little which could move the stock for fundamental reasons. As I am sitting in cash at the moment, I am content to wait a little bit longer before buying back in. I would like to see the current short few day uptrend continue and hold steady, and even better, show higher than average volume. This may happen and "death cross be darned!" the share price could very well take off skyward. I will be watching closely.
Long term I am still quite bullish on Sirius XM, especially from present levels. If you're "long and strong!" I think you'll do quite well, no matter what the short term has in store.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SIRI, LMCA over the next 72 hours.