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Are Overstock’s Blockchain Investments Paying Off?

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Overstock (OSTK:NASDAQ) is one company in which you can invest in to obtain exposure to the value that blockchain technology will unlock in the years to come. As one of the first adopters of Bitcoin, it is clear that the large retailer dances to its own tune, whereby investment in blockchain technology has been a key priority for the firm.

While Overstock does not care much for operating cash flow and recent negative earnings per share reading, their blockchain ventures could pay off nicely in the future and drive a long-term bullish drive for the company’s stock price.

 

Overstock's Blockchain Focus

Medici Ventures is a wholly owned subsidiary of Overstock, with a strong presence in the blockchain space; Medici project investments include t0, PeerNova, Bitt.com and Identity Mind. Bitt delivers a wallet service, PeerNova builds immutable systems for large-scale operations while IdentityMind constructs digital identities to ensure integrity in global digital commerce market.

PeerNova, of which Overstock has a 7.5 percent ownership stake, aims to bring at least three fully functioning projects to market in 2017 and plans a joint venture with Zhejiang Zhongnan, a Chinese construction firm.

Whereas t0, a majority owned subsidiary of Overstock, focuses on the development and commercialization of financial technology (FinTech) based on cryptographically-secured, decentralized ledgers, commonly known as blockchain technologies. November 15 saw t0 demonstrate their blockchain-based asset trading platform at the Global Fintech Hackcelerator. Patrick Byrne, CEO of Overstock, stated with regard to performing at the Monetary Authority of Singapore event, “The opportunity to demonstrate the power and efficiency of the t0 platform before such an impressive body is a privilege.”

The blockchain platform is highly likely to trade faster, perform well and create value for the company, and if this comes to fruition, Overstock’s share price will rise as a result. The return on its investments could be significant given its potential first-mover advantage; as stock researcher Braam De Haas argues, “Overstock could very well be the first to market with a [blockchain-based] exchange that meets the requirements as set by the legislator.”

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Although the latest earnings per share were negative, Overstock has been pushed to a yearly high, shown below by the daily price action, briefly pushing above $18.00. The strong bullish momentum is indicated by the near vertical movement of the conversion (blue) line. Also, the Ichimoku cloud is green and trending higher and provides a support zone at which buyers will find an entry point into the upward trend, that is around $15.50.

To know if the market will test this support zone, we must closely observe the relationship between the price action and the conversion line. If the conversion line holds as support going forward then we should see fresh highs established. However, if the price closes below the conversion line, we should see the market tend toward the equilibrium zone and test the Ichimoku cloud.

The most recent fractal sell level at $18.05 signals that a daily close above $18.05 should intensify the bullish momentum and open up an attempt at $24.00.

 

A Strong Upward Trend in Progress?

The weekly price action, shown below, also necessitates a bullish outlook for Overstock, suggesting 2017 could be a very good year for the stock.

Firstly, November 11 saw the breakout of the price action above the Ichimoku cloud, as the stock closed higher than $17.01 that week at $17.35. This provides a buy signal because looking at the chart, we notice that since August 2015, the stock broke below and traded below the Ichimoku cloud. A bottom in the market can be clearly seen at $10.00 back in January 2016 and now that the market is breaking above the Ichimoku cloud, now is the time to buy.

Secondly, the Ichimoku cloud has switched color recently back to green, suggesting that a long-term upward trend is due to take place. Further confirmation will be given when the cloud fans upwards and starts to trend higher.

Thirdly, we have seen the conversion (blue) and base (red) lines converge, suggesting an upward crossover is imminent and once that occurs, we will have another bullish signal.

Fourthly, the lagging line (purple) is above the previous price action and has started to pierce the Ichimoku cloud. Further bullish confirmation will be given once the lagging line manages to follow the price action above the Ichimoku cloud.

Finally, we also see another strong indication to buy from the Awesome Oscillator (AO), which has turned positive, suggesting that bulls in the market will begin to establish their dominance. Also, we see that all recent fractal sell levels have been broken and the most recent fractal sell level that lies untouched is the Q3 2015 high at $24.00.

The chart below illustrates the zone that buyers will be aiming to take the market over the long-term and will provide resistance. The $24.00 handle is a key fractal resistance and the peak of the lagging line at $25.83 is another important resistance level.

 

Overstock to Outperform in 2017?

When looking at key metrics for performance, Overstock could be overlooked as a promising buy. Their relentless effort in the blockchain space means that the company could strike it big in 2017, with a nice bullish set up illustrated by the chart above. This is one company stock that would be worth buying if you want exposure to the growth of blockchain technology.