First post on Overstock.com [OSTK]

After learning from commenter Augustine in response to this post that Overstock.com's leadership was Libertarian I thought it would be interesting to "EW their chart" to see if there was any difference between this company and the broader markets.  Below is the log scale model at the monthly level.  Interestingly, OSTK is out of phase with the broader markets.  Its bottom was not 2009 like all of the companies whose bounce was goosed by help from the fed.

First off, a rising tide floats all boats and few if any will be levitating above water level if the tide goes out very suddenly.  Certainly not in retail as it is a commodity business.  The difference between good retailers and poor ones will be measured by survival or lack thereof.  The good ones will be there after the flood waters dissipate and the bad ones will have been washed away.

Overstock's wave count can be interpreted in 3 different ways:

• The red count does not say whether the 2004 peak was the end of a motive wave or just then end of the 3rd wave up of a motive wave.  It does have the look of W3 to me but there is not enough prior data to be sure.  But whether it was a 3 or a 5, it is clearly still retracing that monster move up.  So far this has taken the form of 3-3.  In other words 3 down into 2011, 3 up into 2013.  The red path says that this will be a flat correction meaning it now need to finish 5 waves down.  
• The cyan path says the same thing as red except that wave 5 down will fill the gap before reversing.  That scenario would be a massive but short lived market panic that fulfills Prechter's Conquer the Crash vision.
• The blue path says that the last move up was w3 instead of 5 of 1.  Thus OSTK finishes out a HT4 maybe to $7 and then enjoys a strong 5th wave to higher highs before its next big pullback occurs to $7 again.  I could see this happening if there were a big crash, then OSTK made bank clearing out the old inventory paid for by collapsing debt (the liquidation phase should benefit liquidators!).  At some point the liquidation is done (peak of coming 5th) and liquidation profits fall (a-b-c into wave 2).

Bottom line, avoid this stock until we see 5 down complete and then jump on it because we already know how volatile it will likely be to the upside.  This was trading at $80 back in 2005 and the higher high that I model is coming after the crash is certainly worth making a portion of your recovery portfolio.