Overstock Shares Surge: Why This Could Be The Beginning Of A Reversal

Overstock.com Inc. OSTK shares are trading significantly higher Wednesday after the company announced its latest financial results.

Overstock said quarterly revenue declined 9% year-over-year to $612.66 million, coming in below the estimate of $657.39 million. The company reported adjusted earnings of 36 cents per share, coming in below the 39 cent estimate.

Additionally, Overstock's tZERO ATS said it successfully launched support for the clearing and settlement of securities transactions for itself and its broker-dealer affiliates.

Overstock was up 26.25% at $46.02 at press time.

Related: What's Going On With Overstock Shares Today

Overstock Daily Chart Analysis

• Shares saw a big push higher after the company's earnings report, and the high of the day was near resistance in what traders call a descending channel. This channel is starting to form after the stock has seen a long period of freefall. A break above resistance could cause a bullish reversal to happen in the stock’s future.
• Overstock trades below both the 50-day moving average (green) and the 200-day moving average (blue), indicating the stock’s sentiment has been bearish. Each of these moving averages may hold as an area of resistance in the future.
• The Relative Strength Index (RSI) saw a push higher after the earnings announcement and now sits at 46. This shows that more buyers have entered into the market, increasing the balance between buyers and sellers.

What’s Next For Overstock?

Overstock is seeing a strong period of volume and bullish movement, and looks like it could see a reversal to the upside in time.

Bullish traders are hoping this momentum will continue, and the stock will be able to break above the channel resistance. Bulls are looking to see higher lows and the RSI cross above the middle line.

Bearish traders on the other hand are looking to see the stock fall back lower and break below the channel support. This break below support could allow the freefall to continue.

Photo: Courtesy of Alt Summit on Flickr