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OpenTable Squares Off Against Familiar Resistance

OPEN's 200-day moving average could translate into an added layer of resistance

by 6/12/2012 10:35 AM
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The shares of OpenTable Inc (OPEN - 43.78) are headed straight for a familiar foe on the charts. Specifically, the equity is staring up at the $44-$45 neighborhood, which has played the part of staunch resistance since early March, and smacked OPEN significantly lower in early May. What's more, this region is now home to the stock's descending 200-day moving average. Against this backdrop, it appears a handful of options traders -- or OPEN shareholders -- are betting on intermediate-term resistance for the shares.

During the course of yesterday's session, OPEN saw roughly 11,000 calls cross the tape -- about eight times its average daily call volume. Most of the action centered on the out-of-the-money October 47.50 call, which saw more than 5,700 contracts change hands. Ninety percent of the calls traded at the bid price, and call open interest at the October 47.50 strike skyrocketed overnight, pointing to sell-to-open activity.

Assuming the traders are also OPEN shareholders, they're likely writing covered calls to supplement income in the event of another rejection in the $44-$45 area. As long as OPEN remains south of the $47.50 level through October options expiration, the calls will expire worthless and the traders can retain both their OPEN shares and the net premium received from selling the options.

Technically speaking, OPEN has shed about 45.8% over the past 52 weeks. On the sentiment front, the Street appears to be growing wary of the stock, with short interest accounting for more than half of OPEN's total available float. However, not everyone has boarded the bearish bandwagon, with one-third of the ranking analysts maintaining "buy" or better endorsements, and just one brokerage firm offering up a "sell" suggestion.

Daily Chart of OPEN since March 2012 With 200-Day Moving Average


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