Wall Street experts now agree that the new way of doing business is to have a subscription service. Sirius XM (NASDAQ:SIRI) holdings has such a model. Nevertheless, SIRI stock is still mired below $10 per share. But there is an opportunity setting up for the next two weeks.
Fundamentally, the stock is not cheap as it sells at 29 price-to-earnings ratio and 4.25 times sales. Its market cap is almost $30 billion and it also yields a small dividend. The financial metrics from that perspective are not a complete disaster at this time. The long-term future of this company is not in doubt and it will reach its heyday at some point.
But today’s write-up is of a tactical setup rather than one based on fundamentals. SIRI’s stock range has been tightening with higher lows knocking on the $6.50 roof. If the bulls are able to break above it, they can overshoot and cover the gap from the late September correction. The Sirius stock bulls have the benefit of a well-consolidated zone below $6.20. This is proven support for footing so they can continue the upwards effort.
Sirius Stock Is Lagging but Hope May Be on the Horizon
On the face of it, 2019 has not been a good year for SIRI. The stock is only up 6% which is less than half of the S&P 500. But considering that the sock rallied 22% off the June lows, the bulls should consider themselves lucky. Now it has come into a pivot level. Those tend to be resistance until the bulls can prove they can breach them. The resistance turns into a sling shot.
However there could be a wrinkle in the setup, which are the earnings that are coming soon. Earnings events are almost always binary for the short-term and can definitely ruin a bullish stock posture like the one in SIRI stock now. Enthusiasm in either direction should be tempered.
The good news for the bulls is that even if it dips on earnings it should find footing quickly. The 12-month volume point-of-control lies just below and those are usually support on the way down. Management will really have to mess things up in order to give the bears reason to sell it this hard. For as long as Sirius stock is making higher lows, then the buyers are in control.
General sentiment on Wall Street is much improved and the earnings reactions so far have been more favorable than disastrous. Even when the stories are less than perfect, the dips are shallow and buyers are attempting to catch the falling knives. Case in point: Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) reported earnings on Monday and disappointed investors, yet the stock barely dropped. So SIRI management has a small tailwind from that perspective. Unless they completely mess the quarter up, the upside scenario looks more likely than the downside.
Being Tactical With SIRI Stock Is Important
It is important to remember that this is a tactical trade, so investors should keep it on a short leash. It is ill-advised to turn trades into investments. The chart setup is pretty, but if it gets broken then so is the trade and it should be closed. In addition we also have several other binary events that will affect the markets in general.
Today the Federal Reserve will tell investors their decision on rates for the rest of the year. Moreover, we will also get the all-important ISM and Non-Farm payroll jobs reports on Friday. Each of these events is a coin flip and has the potential to move the market in a big way. This is all to say that caution is warranted in either direction.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here.
