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I have a Master of Public Affairs degree (Political Economics with a Major in Management) from the University of Texas at Dallas (UTD). I love to write but am more logical and mathematical in my thinking. It brings to mind something that my 6th grade teacher posted on the wall by my desk - a... More
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  • A Golden Cross for SiriusXM Radio? 0 comments
    Nov 28, 2011 12:54 PM | about stocks: SIRI
    Is SiriusXM Radio (NASDAQ:SIRI) ready to pop?  Many longtime Sirius investors can't wait. There have been a lot of positive financial reports, and the future looks bright for the company. However there are still some Sirius Bears ready to twist any type of technical signal into a negative.
     
    The Death Cross

    According to an article this week, written by Stock Croc, the 50 Day MA is about to cross the 200 Day MA. 
    The 200-day and 50-day moving averages are indicating a potential death cross, which worries technical analysts.
    It is true the lines appear ready to cross. The only problem is that he is predicting a death cross, which is impossible at this time. As Simon Maierhofer pointed out earlier this summer:

    It’s official, on August 11, the S&P’s 50-day simple moving average (NYSE:SMA) sliced below the 200-day SMA. This condition is dramatically called the death cross.

    The death cross has foreshadowed some remarkable market meltdowns (-46% in 2000 and -55% in 2007) and shouldn’t be ignored.
    The actual death cross for SiriusXM already occurred 2 months ago in October.  After the actual cross, the 50 Day MA has remained below the 200 Day MA.  Thus, if the lines do cross again, the 50 Day MA could only rise above the long term line, since it is already below it. If this cross does occur it is actually a Golden Cross which is a strong buy signal.


    Above is an example of the SiriusXM death cross in October which usually occurs after a drop in price begins. As you can see the 50 Day MA still remains below the  200 Day line.

    The Golden Cross


    According to Kapitall, the definition of a Golden Cross is:
    ..........stocks exhibiting the technical indicator “golden cross,” in which a stock’s 50-day moving average crosses above its 200-day moving average.

    Consider this ten year history of SiriusXM, which includes both types of crosses:

    There is a Golden Cross in 2003, which precedes a $3 gain in share price over the next year. Then a very dramatic Golden crossover in  2004 which sends the stock skyrocketing from $2 a share to $9. A small, short lived cross at the end of  2007 created a $1 per share gain. This was followed by the most recent one in 2009 which lasted for two years and produced a $2 per share gain. 

    So for the last 10 years Sirius has produced substantial gains every time the 50 Day MA has crossed above the 200 Day MA.  So are they going to cross, and if so bring on a dramatic incline in price? This is why we study History, because it usually repeats itself.



    Disclosure: I am long SIRI.
    Stocks: SIRI
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