Charting Sirius and XM Satellite Radio

While radio listeners and investors are anxiously awaiting word from the FCC on the approval for the recent proposed merger of Sirius Satellite Radio (SIRI) and XM Satellite Radio (XMSR), I thought it would be prudent to look at the charts briefly to see where these stocks have travelled and what may be in store.

Business Week reports that the FCC is close to making a decision regarding the merger of the only two satellite radio companies into one company. The Justice Department recently “green-lighted the deal, declaring that the $13 billion combination would not create a harmful monopoly.” The authors write “Although the FCC traditionally does not block mergers after Justice Dept. approval, neither company wanted to celebrate prematurely.”

Unfortunately, fundamentally speaking, these companies have both reported fiscal losses for 2007. According to the Business Week article, “Sirius reported operational losses of $327.4 million for 2007, which was an improvement over its $513.1 million in operational losses for 2006. XM reported 2007 losses of $682 million, a roughly $37 million improvement from the prior year.”

And now, on to the weekly charts:

XMSR appears to be building a base, and investors/traders have been ‘scooping up shares’ whenever the price tested near the $10.00 zone, indicating strong support at that level. Bears step in and provide resistance around the $16 level.

Last week, 91 million shares were traded, due to the announcement of the legal approval of the merger. Nevertheless, the stock fell back quickly following the announcement.

Sirius Satellite (SIRI) did the same:

The charts look similar, only the support zone for SIRI is near $2.60 per share while resistance comes in at $3.80 per share.

The dominant technicals (downtrend, chart patterns, indicators) will be overruled by any major news components in these stocks, and we do expect major news ahead, so don’t hang your hat too securely on any price patterns you might see in either of these stocks.

Trying to trade on news can be risky, but lo and behold if you get on the right side of the announcement, major profits can be made quickly. Newer traders should probably steer clear of betting on such random events with unknown outcomes that can swing price wildly in both directions quickly. Try to accumulate gains slower, rather than trying to hit it out of the park overnight.