Sirius XM is Rising as Earnings Approach

It looks like investors expect a positive result

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This morning, I am recommending a bullish trade on Sirius XM Holdings, Inc. (NASDAQ:SIRI).

With the S&P 500 and Nasdaq Composite indices setting new all-time record closing highs this week, my indicators are giving bullish readings, an upgrade from last week’s bearish to neutral readings. Earnings have been propelling stocks higher lately, especially in the technology sector.

Daily Chart of the S&P 500 Index (SPX) — Chart Source: TradingView

As you can see in the chart above, the S&P is hovering above the 3,000 level again. So far, it has been able to hold above support in the 2,950 area. You can also see that the 50-day moving average (red line) is starting to curl higher.

That’s a positive sign because it indicates that short-term momentum is to the upside. But I’ve noticed something in the tech sector that has me somewhat concerned.

Lower Trading Volume in Tech

The chart below shows the Invesco QQQ Trust (NASDAQ:QQQ), an exchange-traded fund that tracks the stocks in the Nasdaq technology index, with daily trading volume included at the bottom.

Daily Chart of the Invesco QQQ Trust (QQQ) — Chart Source: TradingView

And you’ll see that I’ve circled a few spots on the chart that correspond to intermediate-term market tops. What’s interesting is that each of the two tops shown on the chart were accompanied by lower-than-average trading volume.

Trading volume for the QQQ has been quite low in July so far, and that has me slightly concerned about a near-term correction.

If we’re going to follow the market and take a bullish trade this morning, I want to be cautious. SIRI falls outside the tech sector, and its technical picture looks strong in the run up to earnings.

Pushing Higher Before Reporting

SIRI is pushing higher in the run up to its earnings report on July 30, 2019. Based on the recent bullishness, analysts at Zacks believe the company will beat earnings expectations. I think that is a possibility.

Daily Chart of Sirius XM Holdings, Inc. (SIRI) — Chart Source: TradingView

SIRI has some resistance at just above the $6 level. If there investors are optimistic about SIRI’s upcoming report, the stock could push above resistance before reporting on Tuesday, however it’s possible that the stock will pull back before then.

I’m recommending a call option with a strike at the $6 level.

Buy to open the Sirius XM Holdings Inc. (SIRI) Sept. 20th $6 Calls (SIRI190920C00006000) at $0.38 or lower.

With this trade, we don’t need SIRI to move far above $6 for this trade to become profitable. Since the options are cheap, we also aren’t risking much by holding the option through earnings.

InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.


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