The stock market is a very interesting place. It brings out glee, disappointment, anxious anticipation, and overwhelming despair. In many ways, investors pin their dreams on the hope that the equity they invest in will be the next great thing. It also brings out various strategies to try to increase the odds of success. These strategies do not always work, but at times they can allow an investor to accomplish a goal with more confidence.
Over the past three trading sessions, Liberty Media (NASDAQ:LMCA) was able to purchase just over 40 million shares of Sirius XM (NASDAQ:SIRI) without even really moving the needle on the share price. Incredibly, Liberty was able to accomplish this when its trades accounted for 45% of the volume. Is Liberty Media getting technical?
With Sirius XM shares appearing ready to take a breather and consolidate, something came into play that keep the stock from drifting down. Many technical analysts, including myself, saw Sirius XM as being in a bullish pattern long term, but simply walking down in the near term to gather support and steam. It did not really materialize, and now we know why.
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Over three trading sessions, Liberty Media bought just over 40 million shares. Because of how Nasdaq accounts for volume, these transactions were nearly 81 million shares in volume. Nasdaq counts the buy side as well as the sell side in its volume calculation. Essentially, Liberty was able to account for almost half of the volume and accumulate a massive amount of shares, all the while keeping the stock price in check. It almost defies logic, and is one reason that technical analysts were a bit confounded.
Of particular interest was the action this past Monday, when Liberty transactions accounted for almost 60% of the volume and the equity traded between $2.53 and $2.54 all day long. Liberty's average price that day was $2.53.
I wrote three technical pieces that would be good to read with the 20/20 hindsight we have now:
- After the close Aug. 23, I wrote "Sirius XM Drifting To Lower Levels." The next day, Liberty began its buying.
- After the close Aug. 24, I wrote "The Sirius XM See Saw At $2.50." In the next trading session, Monday, Liberty had its biggest day in trading.
- After the close Aug. 27, I wrote "The Sirius XM Technical Quandary." This was immediately after the market closed on Monday and Liberty had made its most substantial purchase.
Then, after the close on Aug. 28 and before the Liberty News hit the wires, I wrote "Sirius XM - What Happened To The Volume?" This was just after Liberty's last purchase in the buying spree. Subsequent to this piece being published, the Liberty SEC filing announcing its buys was released.
Liberty could very well be getting technical. Sirius XM was taking a breather, trading at lower-than-average volume, and was in the doldrums of summer market lulls. It seemed ripe to consolidate, and what actually transpired was that it consolidated into the hands of Liberty Media -- taking the company up to a 48.8% stake in Sirius XM.
Liberty Media had incredible patience in this latest move, and it paid off in a big way. A large buyer entering the market would typically send an equity marching upward. It appears that Liberty was the smartest player in the market over the last three days. Is the proverbial cat out of the bag? Perhaps, but then again, Liberty only needs another 75 million shares to reach 50% on an equity that averages over 50 million shares in volume each day.
Disclosure: I am long LMCA, SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.