By their very nature, penny stocks are extremely risky and that’s the category Opendoor Technologies (NASDAQ:OPEN) falls under. Unfortunately, there’s no way around the label. Since the start of the year, OPEN stock has lost more than 51% of equity value. In the past 52 weeks, it has cratered almost 64%. It’s difficult to imagine how much more damage it can take.
Of course, the problem is more than just technical in nature. With millions of Americans struggling from years of inflation and an increasingly difficult job market, it’s tough to make ends meet. Add in the political turmoil, especially as it relates to tariffs and consumers are simply in no real mood to go house hunting.
While those are interesting details, ultimately, demand for OPEN stock comes down to a binary equation. Either someone is convinced that taking a risk in the equity is worthwhile or they are not. There are no half-demand states of existence.
Although the above is a painfully obvious point, it also gets lost in the muck. Within the investment media ecosystem, an assumption exists that presenting different opinions and angles bolsters an argument. In reality, no one in the public domain knows more than is revealed.
If we’re being honest, it’s difficult to distinguish one financial publication from another.
About the only thing that is useful in an analysis is demand. It’s a discrete event, meaning that it has boundaries. Further, expressed as a binary string, different demand profiles can transition from one form to another, much like a disease metastasizes.
Such transitions enable the deployment of Markovian principles, roughly the study of causality and probability. It’s one of the most overlooked concepts in finance yet can open doors to profound knowledge.
It’s difficult to see, in fact, impossible under standard technical and fundamental methodologies. However, OPEN stock just flashed a possible bullish reversal signal — and quite loudly.
In the past 10 weeks, the security printed a “2-8” sequence: two weeks of upside interspersed with eight weeks of downside. Part of the significance is rarity. Since Opendoor’s public market debut, the 2-8 has flashed only six times. However, in five of these instances, OPEN stock popped higher in the subsequent week, which corresponds with this week.
Interestingly, though I’m not putting too much weight into it, OPEN gained nearly 2% on Monday, seemingly out of nowhere. Also, during Tuesday’s pre-market session, the security has been slowly moving higher.
Over the next three weeks, historical data from the 2-8 sequence response projected forward is calling for the price to challenge the 90-cent level, perhaps exceeding it. This could give you a quick double-digit-percentage pop before exiting and moving onto the next idea or opportunity.
It’s possible that OPEN stock could initiate a more sustained recovery — but it will be a risk. In either pathway, positive or negative, you can expect a high degree of choppiness.
On a final note, because of the rarity of the 2-8 sequence, the pattern may suggest that the bears may be getting exhausted. If so, it’s not out of the question for OPEN stock to meaningfully recover.
