Chart Signaling 45% Upside in This Under $3 Stock: SIRI

When I bought a new vehicle last year, it arrived with a free six-month trial to Sirius XM Radio (NASDAQ: SIRI), the commercial-free satellite radio provider. I was skeptical, but took advantage of the trial -- after all, it wasn't costing me anything. But with dozens of free, local radio channels at my fingertips, I couldn't imagine why I'd pay for it.

Fast forward one year and I admit I'm hooked. Sirius has become a part of my driving routine. Most of the time, the channel is parked on classical music, although I occasionally switch to commercial-free talk shows. Now, I find it hard to imagine going back to commercial radio!


It seems I'm not the only one. Sirius has developed a loyal following. The world's largest radio broadcaster, by revenue, currently has 22.9 million subscribers. And this number is regularly increasing.

For the third time this year, the company raised its full-year guidance on net subscribers. Management now expects to add about 1.8 million new subscribers by year-end, up from previous estimates of 1.6 million.

Since many new cars come with a Sirius trial subscription, much of the company's growth is driven by robust North American auto sales. An August Scotiabank Economics report showed double-digit gains in North American car sales so far this year -- the highest level since 2007. Similar increases are expected in the second half of 2012, due to record low interest rates.

Sirius isn't just found in people's cars, however. Commercial-free radio programming has found its place in the home, the office, and in businesses, like restaurants and hair salons. In fact, Sirius is the second-largest subscription-based entertainment provider in the United States behind only Internet movie provider Netflix (NASDAQ: NFLX). And, according to many industry analysts, Sirius should be able to double its user base in the coming years.

The technicals paint a bullish picture for Sirius. Since December 2010, the stock has been in a major uptrend, rising about 390%. As I'll explain below, the shares show no sign of slowing down.

By April 2011, the stock hit a multi-year high at $2.44; however, unable to maintain this level, Sirius fell to a low of $1.27 before again gaining ground. The stock tested resistance near $2.40 in March 2012. But, yet again, it could not penetrate this level, and fell. (more)