Sirius Charts: $1.50 Remains the Target

Sirius shares are high volatility and that is reflected in the charts.
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Sirius

(SIRI) - Get Report

has become one of those trading stocks -- a stock that despite its price creates an enormous amount of volume day in and day out. Some might say it is inching towards cult status with its detractors and supporters hanging on every move and word spoken. All I can say is that SIRI is high volatility and the charts show that.

Our

last look at SIRI

came back at the end of February and at that time we were thinking $1.50 was the target. You can refer back to that article for the longer-term view and how the $1.50 target was reached, but for this article I'll concentrate on what has transpired on the weekly and daily charts and why that $1.50 mark remains the target.

Let's start with the daily chart on which we can see that last week prices pushed to the recent highs at $1.18 with volume expansion, but were unable to hold price.

When you push the swing point with volume, you will be back to it in most cases. That's the good news for the bulls out there.

The bad news is that prices could retreat all the way back to that high volume sign-of-strength bar at 96 cents in which volume expanded to over 500 million shares.

On the weekly chart, the swing low now stands at 79 cents, which, if you recall, would have stopped us out the last time we were sizing up the long trade on this chart.

Given that the volatility in this name is high, we know from experience that this stock has to be traded and you have to watch it each and every day for additional signals.

For example, when we last looked at SIRI our thought was to use the 88 cents area as a stop-out. If you did that, you stopped out. Despite that, if you continued to monitor the stock, the re-entry buy was evident on the day of strength (April 7) whereupon you could have remounted your long positions with a couple cents of where you stopped out a month earlier. During that month-long wait, you would have avoided all the anxiety that would go with being long and not knowing if SIRI would eventually come back.

That's what stops are for; they are protection. They are placed at the point where the odds highly favor the moving further against you. They are not a signal to quit trading the stock but instead to get out of the way and reevaluate at a later date.

More on Sirius XM

Why Sirius XM Won't Be Delisted

Sirius XM's Three Biggest Risks

Turning our attention back to the intermediate-term time frame, the stop-out now is 83 cents (just below the weekly bar where volume expanded significantly). That implies that if you are trying to add to an existing position or start a new one, you need to get a retrace towards the $1 area to get you in again with a decent reward-to-risk ratio.

SIRI toyed with a breakdown back in March but instead simply created another higher swing low while consolidating for a month. Recently, the stock took off once more and is now threatening to break higher a push towards the target price of $1.50. Given the parameters outlined, it is still possible to trade new SIRI long positions, but you need a retrace in order to do so without taking undue risk.

If you are already long, just sit tight and keep your stops in and until next time, just keep trading the charts!

At the time of publication, Little had no positions in the stocks mentioned, though positions can change at any time.

L.A. Little, author, professional trader and money manager, writes daily on

www.tatoday.com

, a free educational site for traders and investors. He has been featured in numerous publications and is the author of

Trade Like The Little Guy

.

His background includes degrees in philosophy, computer science, computer information systems and telecommunications. With a trading philosophy centered on capital protection first and the accumulation of consistent gains over time, L.A. espouses a simplistic technical approach to trading the markets that is a throwback to the days of past. With a focus on swing points and the qualification of trends, L.A. provides a breath of fresh air to an otherwise crowded room of derivative indicators with the emphasis on technical minutiae.