After an incredibly successful IPO and a decent earnings report last night, Opentable ($OPEN) is seeing sustained weakness on news that the CEO is changing roles and moving on to other roles in Silicon Valley. This move was unexpected, and the stock price is reflecting that sentiment.
In other words, stockholders are throwing a temper tantrum.
A Dinner Party full of Bears
The stock has been a momentum darling since February 2010, and the stock nearly quadrupled since then. The stock is giving back a few months of hard work, and there's definitely blood in the streets. The day's move represents a 4.7 standard deviation from normal volatility-- an event that is statistically improbable but the recent events justify the move.
The Technicals are Lining Up
I think this move is overdone, and there are ways to structure risk in the options market so you can take long exposure without getting pie on your face. The options implied volatility has dropped due to the event risk but not as much because of the actual volatility in the market. Should the stock calm down or at least consolidate over time, we should see the name have more premium pulled out of the options.
Below is the chart that highlights the main support level I'm watching. Odds are we'll find buyers step in when we come back to these prices. Am I expecting this to get back to 110 anyime soon? Probably not-- it should be rangebound for another quarter. But for now, we can play the mean reversion game.
