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Online discount retailer Overstock.com Inc. (OSTK:NASDAQ) jumped out at me right away when looking at its two-year weekly chart. The reason for this being that shares are trading in an extremely predictable pattern here. My annotations on the graph above appear to be complex at first, but will become clearer once each section is broken down individually.
First, take a quick peek at the two green arrows at the very bottom. You’ll notice that at this point the stock found strong buying support somewhere around $14 per share. In fact, this bottom helped to define the rounding bottom typical of stocks that have ended their downtrend and are now back on the rise. To illustrate my point, I attempted to draw the rounding nature of this technical pattern on each side of the green arrows.
This brings us to today’s price near $22.38. Just above the current price lies major resistance, shown by the lowest horizontal bar in black. Now, since this is a rounding bottom I have every reason to believe that the stock will surge to new heights fairly easily.
From there we’ll probably test $22.50 and eventually head towards the next area of resistance near $31.80. Given a successful breakthrough here, you could see shares rise to $40 in one year’s time.
In my estimation, you should watch these key resistance areas carefully. Each time the stock breaks through each level, you could buy in and then flip it (sell) before it comes too close to the next barrier.
The best part is that you know the stock has already hit bottom. The wind is at your back -- make your move.
Good investing,
Stephen Oakes
Editor, Volume Spike Alert
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