- Overstock.com shares rose more than 20% after FINRA approved tZERO's membership application.
- The company plans to launch tZERO Markets within the next couple of months as a retail brokerage for digital securities.
- Technical indicators suggest that Overstock shares may have more room to run, but the intermediate trend remains bearish.
FINRA's approval enables tZERO Markets to offer its customers retail brokerage services for digital securities and provide issuers with investment banking and placement agent services in connection with capital raising activities. The company expects to launch tZERO Markets within the next couple of months, opening the door to a new line of business.
Last week, Bank of America initiated coverage on Overstock with a Neutral rating and a price target of $78.00 per share, citing trading multiples that already account for future growth rates. However, the analyst said that the company could see a profit inflection if the company prioritizes sustainable, profitable growth rather than a costly pursuit of category leadership.
From a technical standpoint, the stock reversed its decline dating back to mid-August and rebounded above the 50-day moving average at $75.49. The relative strength index (RSI) rebounded to neutral levels of 48.66, while the moving average convergence divergence (MACD) showed signs of reversal following its significant decline. These indicators suggest that the stock has more room to run, but the intermediate-term trend remains bearish.
Digital currency is a form of currency that is available only in digital or electronic form, and not in physical form. It is also called digital money, electronic money, electronic currency, or cyber cash.
Traders should watch for a breakout from Fibonacci resistance at $76.49 over the coming sessions toward the stock's prior highs of nearly $129.00. If the stock moves lower, traders could see a retest of reaction lows of around $60.30. A further breakdown could lead to a move lower toward $42.00 levels, although that seems less likely to occur given the bullish fundamental picture surrounding the stock.
The Bottom Line
Overstock.com shares rose more than 20% during Thursday's session after FINRA approved tZERO's membership application, paving the way for the launch of tZERO markets within the next couple of months. Technical indicators suggest that there's more room to run, but the intermediate-term technical outlook remains bearish.
The author holds no position in the stock(s) mentioned except through passively managed index funds.