OSTK Stock: One Last Hurdle to Clear
Bitcoin has been getting quite a lot of attention lately, and for good reason, I might add. The cryptocurrency is up 1763.3% year-to-date, and the enthusiasm for cryptocurrencies and blockchain is spilling into the stock market.
As a result, I am focusing on a name that has been brought back to life, due to its ventures into cryptocurrencies and blockchain technology. That name is Overstock.com Inc (NASDAQ: OSTK) stock, and it is currently up an incredible 423.2% since late August.
I am focusing on OSTK stock for a number of reasons. First off, this company is in a sector that I currently believe has further to appreciate.
The second reason, and perhaps the more important one, stems from the Overstock stock chart. This OSTK stock chart is very compelling, and it is approaching a very key price point. Once this price point is breached, there is no saying how high this investment can travel; the sky will truly be the limit.
Before I outline this price point, I will highlight the indications that have been supporting this move toward higher OSTK stock prices. These indications have been highlighted on the following stock chart.
Chart courtesy of StockCharts.com
In August, Overstock stock generated a golden cross. A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red).
The golden cross is popular among the investment community because it is used to confirm that a bull market is in development. Due to its significance, I have found it wise not to trade against the direction suggested by this indicator.
Once this indication was generated, it substantiated that a bullish trend was in development. This bullish trend has been characterized by a series of higher highs and higher lows. These are the quintessential characteristics that are required to build and sustain a bullish trend.
In November, a substantial selloff ensued in which Overstock stock corrected by 36.4% before finding its footing on the 50-day moving average. A few weeks later, a bullish moving average convergence/divergence (MACD) cross was generated, implying that further gains are on the horizon.
The MACD indicator is a momentum indicator that distinguishes between bullish and bearish momentum. This is a significant indicator because, in order to sustain a move toward higher prices, bullish momentum is required.
Now that I have established the indications that are currently supporting this advance, I can focus on the price point that is fast approaching
This price point I speak of is highlighted on the following Overstock stock chart.
Chart courtesy of StockCharts.com
Overstock stock is approaching its previous all-time high of $77.18 that was established in December 2004. It has taken 13 years to return to this price point, so it’s fair to say it’s a significant level.
Once OSTK stock breaches this significant level, there is really no telling how high the stock price can travel. The reason for this is that, when a longstanding high like this one finally succumbs, it creates an environment where anyone short on Overstock stock will be pressured to cover, while momentum trades are chasing the prices higher at the same time.
Under such conditions, sky-high valuations are possible as the the perfect storm toward higher prices is created.
Making such a bold statement—given Overstock’s performance since August—may seem like a stretch, but let’s not forget that Bitcoin, the leader of the pack, has put up performance numbers like 1763%, which means that companies operating in this space can also experience a similar level of performance.
I am currently bullish on the prospects of Overstock stock going forward. The indications on the company’s stock chart support the notion of higher prices, and a break above the previous all-time high of $77.18 would suggest that OSTK stock has much further to run.