Sirius XM (NASDAQ:SIRI) kicked off July with a bang as the equity rose some 7% and peaked just above $2 before closing at $1.99. The best part of the news for Sirius XM longs is that the move happened on above average volume. Now for the question mark though. Did this move happen from a pure technical standpoint, or was there another force, namely Liberty Media (NASDAQ:LMCA), at work?
The answer to the Liberty Media question will come in due time. If it was Liberty Media, there will certainly be an SEC filing indicating a buy. Even if Liberty was the cause, there are several technical factors to look at.
As I have stated before, I am a a fan of watching volume, support and resistance levels, and Exponential Moving Averages (EMA's). The first and easiest step in my analysis comes with the volume. Did the move happen on volume. The answer to that is yes. For longs that is good. The second step is understanding the technical support and resistance levels. They are as follows:
$1.80 - Very weak support
$1.84 - Moderately weak support
$1.90 - Very strong support (was very strong resistance until today)
$2.02 - Very weak resistance
$2.11 - Very strong resistance
$2.16 - very strong resistance.
As you can see Sirius XM exhibited strength by passing through the $1.90 range on volume. That is great news as it now establishes a very strong support level that can help build investor and street confidence. Asking Sirius XM to pass through two resistance levels and close above $2.02 was probably a tall order, but the company did peak there, indicating that it can move in that direction.
There was a substantial threat that Sirius XM could have seen a breakdown had it passed below support at $1.80. The company held the line very well, and now a lot of technical concern begins to evaporate. One substantial wildcard is that we like to see moves confirmed. That means we want to see another strong day Tuesday.
Now to the EMA's. That chart is looking much better now thanks to the convergence of the 5, 13, 20, and 50 day exponential moving averages. In order for the EMA's to be bullish we want to see the more recent exponential moving averages above the more distant ones. Today we say the 5 day exponential moving average cross over both the 13 day as well as the 20 day averages. This is very bullish. Sirius XM even closed above the 50 day EMA, another signal that the averages will converge and perhaps a longer term crossover will occur.
From an EMA standpoint, things in the short-term are looking bullish for Sirius XM. The company successfully passed two EMA triggers (5 day above 13 and 20) and nearly passed a third (13 day above 20) as well. What we want to see now is confirmation and that happens with the volume and resistance levels. If Sirius XM can go through $2.02 on volume it should test $2.11 with relative ease. If things stagnate from here, we now have a very strong support at $1.90. Part of this whole equation will be whether or not the volume was from Liberty Media. If This volume happened absent Liberty Media influence, than that is a more bullish sign.
The technical picture in the short-term looks very bullish, with the intermediate and longer term being more neutral. Watch for confirmation and surpassing of another technical resistance level on volume. As usual, be ready to trade if that is your style, or gain confidence in your position if you are a holder.