Herb Greenberg pointed out that Overstock.com hid some bad gross margin news in a press release issued on Friday afternoon. Usually, a company that issues bad news on a Friday afternoon is trying to hide something more serious. And Jeff Mathews has done a considerable amount of research on his blog into all the things OSTK could be hiding.
What makes the bad news interesting is that the OSTK chart could be forming a massive head and shoulders pattern. While the pattern has yet to complete, I think the negative news and accompanying high volume decline give the stock a high probability of breaking the neck line.
The only negative I can see in going short from these levels is that 60% of the float is already sold short according to Yahoo Finance. That could make the stock extremely volatile on the way down as the stock gets caught in temporary short squeezes.
Hi,
I don’t know much about Overstock, but I’ve read this very interesting piece a little while ago concerning that very high short % and naked shorting in general. And best of all it’s written by Overstock’s CEO himself:
http://forums.auctions.overstock.com/viewtopic.php?t=6405
Thanks for writing this blog, I read your articles on a regular basis 🙂
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