Get Ready For a Rally from This Blockchain Stock

OSTK stock just pulled back to a historically bullish trendline

Managing Editor
Apr 6, 2018 at 11:23 AM
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After adding an astounding 265% in 2017, Overstock.com Inc (NASDAQ:OSTK) raced to a record high of $89.80 on Jan. 8, but promptly capsized. At last check, the stock is up 0.9% to trade at $35.85, after the company announced Gregory Iverson as its new chief financial officer. If history is any guide, though, it could be time to bet on the blockchain stock's next leg higher.

Specifically, the shares have pulled back within one standard deviation of their ascending 320-day moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, after the previous three times OSTK stock pulled back to this moving average after spending a significant amount of time above it -- looking back three years -- it averaged a 21-day gain of 6.56%, and was higher two-thirds of the time.

Pullbacks OSTK

Options traders appear to be optimistic, judging by the stock's 10-day call/put volume ratio of 1.88 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This reading indicates calls have nearly doubled puts in the last two weeks. 

Digging deeper, the April 50 and 55 calls have seen the largest increases in open interest during this time frame. According to Trade-Alert, the majority of the activity at these out-of-the-money strikes is of the buy-to-open variety, indicating options traders are eyeing a potential rally in the next few weeks. With 44.7% of the equity's float sold short, though, it's possible some of the action could be a result of shorts hedging against any upside risk.

Finally, it's worth noting the security has been good to premium buyers in the past year. The stock's Schaeffer's Volatility Scorecard (SVS) comes in at a lofty 98 out of 100. That means OSTK stock has exceeded options traders' volatility expectations during the past 12 months.

 

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