Overstock Plummets After Its CEO Steps Down

Overstock.com Inc. (OSTK) shares fell more than 15 percent during Monday's session after CEO Patrick Byrne resigned and turned over operations to incoming CEO Jonathan Johnson. The company held a conference call this morning to discuss the handover and the company's future.

Byrne resigned after issuing a bizarre statement last week, saying that he was 'too controversial' to remain at the head of the company. He criticized the FBI and other government agencies for engaging in an elaborate political espionage campaign against President Donald Trump and Former Secretary of State Hillary Clinton where he played a role.

The new incoming CEO promised to maintain the company's direction, but suggested that it wasn't in a rush to sell its retail business, adding that talks with potential buyers, including retailers and financial buyers, haven't reached a level that require public disclosure. Johnson also confirmed that the company's cryptocurrency plans remain on the table.

The significant move lower comes just a couple weeks after DA Davidson analysts warned that Byrne's involvement with the FBI investigation into the 2016 election was a potential risk.

From a technical standpoint, the stock fell to its 200-day moving average at $16.37 during Monday's session. The relative strength index (RSI) fell to 42.68, but the moving average convergence-divergence (MACD) accelerated its bearish decline. These indicators suggest that the stock could fall further before experiencing some consolidation.

Traders should watch for a move to re-test reaction lows at around $15.50 below the 200-day moving average. If the stock breaks down from these levels, it could reach 52 week lows of around $9.00 over the intermediate-term. If the stock rebounds higher, traders could see a move to re-test reaction highs at around $22.00, although that scenario seems less likely.

Chart courtesy of TrendSpider.com. Author holds no position in the stock(s) mentioned except through passively managed index funds.