SIRI 8/13/2013 – Midnight Edition
Over the last two days, Sirius XM Radio (SIRI) has formed a series of reversal candlesticks. Reversal candlesticks are usually early indicators that the prevailing trend is about to come to an end. Let's look at the next chart and these two candlesticks.
The first reversal candlestick formation occurring August 12, 2013 is a "Doji". A "Doji" represents equality between the bulls and the bears. However, as noted in Steve Nison's candlestick charting book, "Doji's" occurring at the top of a long signal a potential temporary top in the stock.
Then yesterday's candlestick formed a "Bearish Engulfing" pattern. This is another bearish reversal pattern. Two signals back to back that the uptrend is potentially at or near the top.
My main concern in the last update was the lack of volume. Well, volume picked up today however it was while the share price was declining, which is typically not a recipe for success. Another concerning factor was that most of the selling took place in the last 20 minutes of the trading day, as seen on the next chart. The next chart is a chart for just today's action in SIRI so you can see the last 20 minutes of activity, which I have highlighted in boxes.
Watch the volume over the next day or two. If SIRI continues to decline and the volume is accelerating, or increasing more than the prior day, then look to the opening share price for SIRI on earnings day as a temporary support line. The opening share price is identified by the green trend line on the first chart above. However if volume is accelerating as SIRI approaches this green trend line, there is a good chance that the support could be broken and further price declines ensue.
So the key items to watch is the volume and price action over the next day or two. After showing two bearish signals in a row, be on guard. $4 may still be reachable, but the road is getting bumpier as it usually does near the end of an uptrend.
Disclosure: I currently have no interest in SIRI and will have to wait until the retracement from $4ish is in progress to look for an entry.