For those who enjoy extreme speculation, Opendoor Technologies (OPEN) just sent out a major public invite. Late last week, the National Association of Realtors disclosed its housing sales data from March, revealing that existing home sales fell 5.9% on a month-over-month basis. That was the largest decline in monthly sales since November 2022, per Barchart content partner The Motley Fool.
As one of the innovators in the broader modernization initiative of real-estate-related transactions, the news hurt Opendoor badly. Pouring salt on festering wounds, the latest statistic represented a worse outcome than the 3.1% decline that The Wall Street Journal expected.
Adding complexity to the matter was that the housing sector simply didn’t atrophy due to homeowners unwilling to essentially sell out of their locked-in lower mortgage rates. Rather, as TMF stated, the “amount of housing inventory on the market is also rising, indicating sellers are putting houses up on the market, but with not as many takers as expected.”
It’s quite possible — perhaps even likely — that President Donald Trump’s economic policies (particularly with tariffs) sparked significant uncertainty, convincing people to put off expensive purchases. Factor in the potential backlash from global partners and the risk of recession — it’s just not a fundamentally conducive time to acquire real estate.
As an online brokerage platform connecting buyers and sellers, in addition to commanding a house-flipping business model, Opendoor is stuck in a rough patch. OPEN stock itself is firmly priced below a buck, suffering the ignominious label of extreme speculation.
Admittedly, circumstances couldn’t look poorer. Nevertheless, the boldest of market gamblers may have a rare opportunity on their hands.
Assessing Behavioral Changes Rather Than Mere Price Fluctuations in OPEN Stock
One of my daily rituals — whether as an investor or as a content contributor in the financial publication space — is to monitor Barchart Screeners. By essentially filtering securities either thematically or strategically, I can cut my research time by several hours, which quickly adds up over time. Just the convenience factor alone makes a Barchart Premier membership worth its weight in gold.
One of the more intriguing — albeit somewhat controversial — screeners is Long Term 100% Sell Signals. As the name implies, this screener targets securities that have incurred a 100% Overall Sell Signal, which represents the combination of all 13 technical indicators that make up the Barchart Opinion index.
Sure enough, OPEN stock was on this list.
Granted, that’s not exactly a strong “marketing” pitch for Opendoor. However, whereas most folks see the rapidly deteriorating price of OPEN stock, what’s also happening underneath the radar is a possible behavioral state transition.
A fundamental logic problem in investment market analysis is to use price to predict price. Pejoratively, many technical models at the root are expressed simply as, “when blue line goes below red line, I buy.” It’s actually also the same for fundamental analysis, as simply taking known numbers and multiplying them against made-up ratios doesn’t necessarily provide intrinsic meaning.
Instead, I think it’s much more prudent to compress the chaos of all price discovery into defined, discrete events. In this way, price action isn’t about a scalar expression but rather a behavioral state. The beautiful thing about behavioral states is that they can be observed and recorded. And if they can be recorded, they can be predicted.
Through an algorithm that automated the aforementioned abstraction (or compression of data), I arranged OPEN stock’s price activity into a quasi-binary code of 33 strings. Specifically, I discovered that the last 10 weeks saw OPEN print a rare “2-8” sequence: two weeks of upside interspersed with eight weeks of downside.
This pattern has only emerged six times in its history — and in all but one case, OPEN stock popped higher the following week.
No Guarantees (But It’s Intriguing!)
Of course, betting on OPEN stock is wildly risky. Priced at 76 cents a share, this is not an investment for the faint of heart — because it’s not an investment. It’s a straight-up gamble. Still, it’s possible that with a potential liquidity vacuum, a tiny bit of good news could send shares rebounding higher (if only temporarily).
Here’s another thing to think about. Over the last roughly three years, OPEN stock printed a few 3-7 sequences: three weeks up, seven weeks down. This sequence only has about a 54% chance of sparking upside, which explains the sustained decline in the equity.
It’s only until you get into the 2-8 sequences and even the sole 1-9 sequence (which resolved in upside, by the way) that you see, at least in percentage terms, a high probability of a bounce back.
To put it simply, yes, I’m presenting a case where OPEN stock empirically may be so bad, it’s good. I’ll let you decide how you want to leverage this intel.
