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Friday’s Deciding Battle: Sirius XM (SIRI)

|Includes: Sirius XM Holdings Inc. (SIRI)

Quick update for those invested in Sirius XM (NASDAQ:SIRI).  As we all should know by now, SIRI has been one of the hottest stocks the past few days.  SIRI has impressed by moving from $.82 a few weeks ago, when I sent out a buy alert, to testing resistance at $1.17 today.  The past few days have seen a very bullish chart but today’s final few hours were not pretty.  Friday will be a very important battle as we will either see the bulls recover and test resistance or the bears overrun and try to press the action below $1.  Let us move onto the charts for further analysis.

1-Min Chart (click to enlarge)

5-Min Chart (click to enlarge)

I posted both the one and five minute charts over the past 72 hours to help give us a wider perspective on what has transpired.  The positive signs are easily identifiable as we had the long bullish trend for about 90% of the past few days.  The CMF was positive almost the entire time on the five minute chart and over half the time on the one minute chart.  That is a great sign of heavy buying pressure rather than selling pressure.

Over the course of the past two days, we saw accumulation (A/D line) gain upward momentum on both charts.  This is another VERY strong bullish signal.  The OBV line confirmed the bullish moves up by trending north as well (morning gaps are not shown in the OBV though).  The ADX line also confirmed the strong trend by rising over 50 on the five minute chart.

However, the last two hours were ugly as the sells started to overrun the buys which can be found on the large move down in the CMF.  This was the first time the CMF trended that far south for that length of time.  The ADX trended towards 25 on the five minute chart indicating the bullish trend is likely to break and the bears could be starting to take over.  The MACD, which was positive most of the past few days, has finally started to trend south with very brief recoveries.  Ideally, I would have liked to see the RSI trend towards 20 by the end of the day.  This would have signaled we are very much oversold which would indicate a reversal could happen anytime.  The RSI is one very important indicator I will be watching tomorrow morning over various time intervals.  While 30 is considered the initial oversold level, 20 would be a much stronger signal of being highly oversold.  The most concerning part is the A/D line trending south with strong momentum.  Without heavy accumulation, we will struggle to find ground to press to the north.  That line needs to level off and trend north as soon as possible to indicate a reversal is likely.  Pay close attention to that.  When that happens, many buyers will feel more comfortable adding to their position.

Does this mean I am bearish on SIRI as the shorts will surely claim?  No, not at all.  The bulls will certainly win this war but the short-term battle may see some losses.  I view this as great news for the bulls rather than a time to panic.  This means we may have another opportunity to buy back cheap shares for greater profits.  So, I welcome some volatility created by the bears.  Plus, it is not too fun to kick the bears when they are down.  I have no problem letting them think they are going to win for a brief period before the bulls run them over once again.  SIRI already released some hints that the first quarter earnings could be stronger than expected.  Recently, SIRI announced they have added over 171,000 new subscribers.  Total subscriber additions increased by 29%, while deactivation's fell only 11% from a year earlier.  SIRI said it had ended the quarter with 18.9 million subscribers which is up 344,765 from a year earlier.  This very positive news should find analysts making upgrades in the future which will only add fuel to the bull’s fire.

However, in the short-term, be careful where you add your money if you want to maximize your profits as we could see some high volatility in the morning and hopefully the volume is strong yet again.  As always, do your own homework to see if you agree.  Good luck out there.



Disclosure: Long SIRI but positions can change at any time