Overstock.com, Inc. (OSTK) shares fell to key support levels after former CEO Patrick Byrne disclosed the sale of 4.7 million shares in a Form 4 SEC filing earlier this week. While large insider sales are typically a bearish signal, Byrne noted in a letter that the sale was due to insurance, controversy, and hedging rather than a lack of confidence in the company.

DA Davidson analyst Tom Forte believes that Byrne's decision to cash out his 4.7 million shares represents a positive development for the stock since it minimizes his ability to influence the stock and decreases the likelihood of a sale of its retail business. The analyst expects CEO Jonathan Johnson to unlock "meaningful value" from the legacy home e-commerce business and build out the blockchain technology portfolio. Forte maintains a Buy rating and a price target of $48 per share on the stock, representing a significant 196% premium to the current market price.

Chart showing the share price performance of Overstock.com, Inc. (OSTK)

From a technical standpoint, the stock broke down from the 200-day moving average at $16.39 toward trendline support before regaining some ground later in the day. The relative strength index (RSI) moved toward oversold territory with a reading of 41.81, but the moving average convergence divergence (MACD) remains in a bearish downtrend. These indicators suggest that the stock could see more downside ahead.

Traders should watch for a breakdown from trendline support that could be a precursor to a move lower to retest lows during June. If the stock rebounds from support levels, traders could see a move to retest the 50-day moving average at $19.42 or prior highs of around $27.00. The lack of selling pressure from Byrne could result in some stability and perhaps a bullish move higher over the coming sessions.

The author holds no position in the stock(s) mentioned except through passively managed index funds.