Shares of real estate e-commerce company Zillow Group Inc (NASDAQ:Z) blasted higher Wednesday after the company announced it had completed its acquisition of real estate search engine Trulia Inc (NYSE:TRLA). The rally in Z stock came on an equally big surge in volume, and now Z stock has regained good upside momentum that active investors can harness.
Zillow reported mixed fourth-quarter earnings a few days ago, posting a loss of nearly $11 million but beating on the top line with record revenues of $78.7 million.
However, the bigger news came late Tuesday when Zillow announced that its buyout of Trulia had finally gone through. Investors welcomed the news, believing valuable synergies between the two companies will boost the value of Z stock. While the companies will continue to operate as separate entities for the time being, Zillow may now be able to better monetize rental property listings.
As for the stock, Z stock’s 15% rally on Wednesday came on more than 10.5 million shares — its biggest one-day volume ever.
Z Stock Charts
On the multiyear weekly chart of Z stock, we see that after shares ended a steep multimonth run by topping out last July, they began to mean-revert lower and found support around a previous horizontal support area from the second half of 2013 and early 2014. Wednesday’s rally has now brought Zillow back to the underbelly of the broken black support line; a break above would be another bullish sign for Z stock.
On the daily chart, we see that Wednesday’s surge in Z stock pushed it marginally above its Nov. 19 highs on a daily closing basis. In early January, Zillow marginally undercut its November lows before settling into a multiweek consolidation phase. The consolidation phase ended when the stock rallied and broke past resistance around the $107.50 area on Tuesday, and was further confirmed with Wednesday’s big move.
While it’s not all that significant an indicator for Z stock, it’s still worth pointing out that shares are now back above their 200-day simple moving average (red line).
All of this is constructive price action, and active investors could look to buy Z stock after some consolidation. Anytime a stock rallies as hard as Zillow did on Wednesday, it’s at risk of digesting some of those gains before resuming the rally.
As such, instead of chasing Z stock higher right now, if shares can hold above and around the $120 area in coming days, you can then target Zillow for a resumed rally toward $135.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
