Sirius XM Holdings Inc. (NASDAQ:SIRI) has been on a tear recently. The broadcasting company known for Sirius XM Radio has seen its stock price vault higher over the past year. Since bottoming at $3.29 last February, SIRI stock rallied as high as $5.53, or 68%, before paring back gains last month.
Selling intensified following last week’s earnings announcement. The April 27 release disappointed investors and quickly sent the stock below key short-term support levels. The downturn has been sufficient in turning the 20-day moving average lower, and the 50-day is following in its wake.
Stocks like SIRI that are nestled below their 50-day moving averages are viewed with skepticism by chart watchers. And with the stock having moved from the nice list to the naughty, don’t expect any help from trend-followers looking to chase momentum.
With a disappointing earnings release now hanging over its head, there’s little reason to get involved with Sirius XM shares — at least on the long side — until its technical posture improves.
Specifically, we need to see the stock break back above its 50-day moving average.
Despite the weakness on its daily chart, SIRI stock’s weekly chart remains bullish. In fact, the past month of selling has created a potential bull retracement pattern for longer-term investors looking to grab shares at a discount. The constructive posture of the weekly chart would prevent me from initiating bearish plays at this juncture.
With the next support level getting close at $4.67, there isn’t much room for a short trade to really flourish.
The SIRI Stock Trade
Though Sirius XM Holdings has listed options contracts, they are by-and-large unnecessary. At $4.85, the stock effectively is an option. In light of its technical posture, the best play on SIRI moving forward is simple. Wait for signs that the stock is rebounding, then swoop in.
You could use a break of this week’s high ($4.98) or the 50-day moving average ($5.13) to confirm its next rally has begun. Until then — steer clear.
At the time of this writing, Tyler Craig had no positions on any of the aforementioned securities.
