Overstock.com, Inc. (OSTK) shares rose about 25% during Wednesday's session amid the company's plans to sell its retail business to double down on cryptocurrencies, as well as the rally in bitcoin prices over the past two weeks. Traders scooped up directionally bullish call options during the session in a bet that any potential offers could send Overstock shares higher.
Last week, Overstock CEO Patrick Byrne told CNN that two very attractive acquirers have shown up following its strong earnings. Byrne declined to disclose the names of the potential bidders or the price tag, but he previously suggested that the retail business could be worth $100 million. A higher-than-expected sale could lead investors to bid up the stock.
Facebook, Inc.'s (FB) plans to launch its own cryptocurrency, called Libra, has also injected enthusiasm into the crypto market. Bitcoin has risen sharply over the past two weeks to clock gains of about 200% this year. The market has also benefited from save-haven buying amid ongoing geopolitical risk factors and potential signs of an upcoming recession.
From a technical standpoint, the stock broke out from reaction highs and its 50-day moving average at $11.54 to reaction highs of around $14.00 during Wednesday's session. The relative strength index (RSI) is nearing overbought levels with a reading of 65.93, but the moving average convergence divergence (MACD) remains in a bullish uptrend toward the zero line, suggesting that the stock has momentum.
Traders should watch for some consolidation between the 50-day moving average at $11.54 and reaction highs of around $14.00 over the coming sessions. If the stock breaks out from those levels, traders could see a move toward the 200-day moving average at $17.62. If the stock breaks down, traders could see a retest of lows near $9.00 per share. Traders will also be keeping an eye out for any potential bids that arise.
The author holds no position in the stock(s) mentioned except through passively managed index funds.