I shorted OPEN today at 55.02. I am using a stop loss at 57.35 but it is mostly a money stop as there is no resistance above 55.30. Hopefully the stock will drop below yesterday's low at 54.25 today before the close so I can lower the stop loss to 55.42.
The reason for the sell is skimpy but makes sense. The 100-week MA is currently at 55.30 and that was yesterday's high. In addition, the stock got up to 55.30 on the 7th of this month, meaning that if the stock does not go higher and does go below a previous day's low, that this will become an indicative double top.
Nonetheless, trading off of what "could be" is never a great idea so the fundamental reason for this sale is the fact that the stock reports earnings on the 31st, which is 6 trading days away. The $50 level is always a major psychological support/resistance level and this stock has moved "straight up" from the 41.68 low, meaning that the probabilities are high that the traders will try to test the $50 level "before" the earnings report so they can see what kind of support is there. In addition, the stock is in an overbought condition, so everyone, including the bulls, would appreciate the stock getting rid of that condition so that further upside, if it is to come, would be supported technically.
As such, I would venture to say the stock will fail here, build a double top at 55.30/55.32 and drop down to the $50 at least.
If the earnings report is not better than expected, the stock could easily fall back down to the 50-week MA, currently at 43.80. The $50 is often a major pivot point in all stocks and I don't see any reason it would not be the same here with OPEN.
By the same token, if the stock can get above 55.30 and close on Friday above the 100-week MA, then the bulls will get their "second" wind and with no chart resistance until $65-$70, the stock would continue to fly.
I just don't see the bulls being successful doing that because they don't yet have any level of support they can depend on to use.
I ended up short in OPEN with short positions put on at 54.86 and at 55.25. I covered those shorts yesterday at 50.03 and at 48.96, meaning that I made about $5.50 per share on each sell mention.
I did cover my shorts yesterday because of the earnings report, especially since the stock had dropped a good amount in the last few days and it did not make sense to stay in for the report.
Nonetheless, this is what I just told my subscribers:
Now that the earnings report is out and the stock is rallying after having tested the $50 level, probably successfully, I believe the bulls will "try" to get the uptrend going again. Nonetheless, the one thing that was not accomplished with this recent drop down to 48.81 is to break the "triple" low at 47.83/47.95. Triple lows generally are broken and I think it will happen here also.
I continue to believe this stock has found a top up at the 100-week MA, currently at 54.15. It is interesting to note that the high weekly close for the last 17 months, seen the week of January 14th, is at 54.15.
As such, I do believe this rally will take the stock up to retest that line, that high weekly close, and the intra-week high at 55.95 with a rally above 54.00. A retest of the high has not yet been seen on the weekly chart and it is likely the stock will close this week in the upper half of the week's trading range suggesting that next week the stock will go above this week's high at 53.31.
I do plan to be a seller up above 54.00 with a 56.05 stop loss and an objective of reaching the 50 week MA, currently at 43.90. That means I will be risking about $2 to make about $10 per share, which is a 5-1 risk/reward ratio.
OPEN generated a red close on Friday making the previous weeks’ close at 54.15 into a successful retest of the 100-week MA. The stock still needs to confirm that retest with another red close this coming Friday but having closed near the lows of the week the probabilities do favor further downside. In addition, the stock did generate a negative reversal this past week having made a new 16-month high and then closing in the red and near the lows of the week. No support is found until the 51.45/51.62 level is reached but already that level has multiple lows, also suggesting the probabilities are high that it will get broken. Drops down to the important psychological support at $50 are likely to be seen this week before the earnings report comes out on Thursday. A rally above Thursday’s high at 55.95 would be considered a strong positive. Stops should now be lowered to 56.05.
OPEN is losing marketshare to Scripps Network Interactive new initiative from The Food Network- CityEats. Watch the trend. There's someone out there finally offering the restaurant industry a better product with a clear focus on the competition.