Stocks quoted in this article:
Satellite radio provider Sirius XM Radio Inc (NASDAQ:SIRI) has been on a tear in 2012, up more than 33% year-to-date. Since bottoming in June, shares have risen a remarkable 26%. Just yesterday, the company reported second-quarter earnings of $0.48 per share, with a slight beat on revenues. So, where do we go from here?
- Technically, shares are approaching the spring peak near $2.40, which happens to coincide with the 2011 peak. Shares could face possible resistance from this level as the run-up has been quick. A little back-and-forth cannot be ruled out. In fact, it might be good for shares to regroup before attempting a successful breakout. (Click the chart below to enlarge.)
- Big call open interest for the August and September series resides at the 2.50-strike price. This could provide a roadblock for the shares as options-related resistance may prevent a successful breakout.
- Short interest remains elevated near multi-year highs. Nearly 10% of the shares available are sold short.
- Based on the average daily volume in SIRI, it would take seven trading days for the shorts to fully cover themselves. This could represent a solid tailwind for shares as shorts continue to cover their positions on added strength.
- Analysts are rather divided on their opinion of SIRI. Six out of the 10 analysts following the stock rate it a "strong buy," while the other four maintain "hold" ratings.
- Lastly, call buying has been quite extreme over the past 10 days. Nearly 16 calls were purchased for every put on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). A lot of this activity could be related to shorts hedging before earnings by buying calls. Still, an unwinding of these calls could stall or create a headwind for the stock.