Take #2: Time to Stock Up on Overstock.com?

About a month ago I brought your attention to Overstock.com, $OSTK, in Time to Stock Up on Overstock.com?. Technically it had been in a symmetrical triangle ready to resolve. Since then it did resolve. But to the downside. Incidentally, notice how all of the Simple Moving Averages (SMA) crossed when the move took place. It has only moved about 40% of the pattern expectation but is already showing signs that it may be ready to reverse back higher. The Relative Strength Index (RSI) is curling back up. In fact looking at the last move of the RSI off of the lows projects a near full reversal of the down move. The MACD has also hit an extreme low and is turned back up and crossed. These support a move higher. But you need evidence to get in. Look for a break back over 19.50 as the trigger to try this long against the base at 18.15. Conversely a failure and move under 18.15 would look for another $9.50 move lower.


With the reward defined as roughly $10 either way, perhaps a simple March 17.5/20 Strangle makes sense. Currently offered for about $1.45 it would make money on a move below 16 or above 21.50 and defines your risk to the $1.45 in premium spent. I put on a few today at $1.38.

Want to learn more about Dragonfly Capital Views?

Dragonfly Capital Views Performance Through February 2014 Expiry and sign up here for the free 7 day trial before you pay.

Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades from Amazon.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus
Dragonfly Caps Blog