Zillow Group Surges 6.85% in Two-Day Rally as Technical Indicators Signal Potential Trend Reversal

Zillow Group C (Z) surged 5.83% in the most recent session, marking a two-day rally with a cumulative gain of 6.85%. This sharp upward movement suggests a potential reversal in short-term sentiment, warranting a deeper technical evaluation across multiple frameworks to assess its sustainability and implications for future price action.

Candlestick Theory

The recent price action features a bullish engulfing pattern, with the second day’s candle (84.84) completely covering the prior day’s bearish body (80.17). This signals a shift in momentum from sellers to buyers. Key support levels are identified at 79.4 (August 11 low) and 76.62 (July 15 low), while resistance lies at 81.28 (August 12 high) and 85.52 (August 6 high). The 79.4 level has shown repeated rejection, suggesting a critical psychological threshold.

Moving Average Theory

The 50-day moving average (calculated at ~78.5) has crossed above the 200-day (75.3), forming a “golden cross” that historically signals a bullish trend. The 100-day (~77.8) aligns closely with the 50-day, reinforcing the uptrend. However, the 200-day lagging line suggests longer-term uncertainty if prices dip below 76.5. Confluence between short-term and long-term moving averages indicates a high probability of continued bullish momentum in the near term.

MACD & KDJ Indicators

The MACD line crossed above the signal line on August 12, confirming a short-term bullish bias. The histogram’s expansion aligns with the recent 5.83% rally, suggesting strengthening momentum. Conversely, the KDJ oscillator shows K (88.2) and D (79.4) nearing overbought territory (K > 80), indicating a potential pullback risk. Divergence between MACD’s bullish signal and KDJ’s overbought condition raises caution, as it may precede a consolidation phase.

Bollinger Bands

Volatility has expanded, with the upper band at ~85.5 and the lower band at ~76.8. The current price (84.84) sits near the upper band, indicating overextension in the short term. A break below the middle band (~81.2) would signal a shift in volatility and potential bearish pressure. The recent contraction in band width during mid-August lows (July 31–August 4) suggests a prelude to a breakout, which has now materialized.

Volume-Price Relationship

Trading volume surged to 4.99 million on the most recent session, a 63% increase from the previous day (3.73 million). This volume expansion validates the recent price surge, as higher volume often confirms trend continuation. However, the 5.83% move occurred on relatively moderate volume compared to historical spikes (e.g., 15.2 million on April 9, 2025), suggesting the rally may lack broad institutional participation.

Relative Strength Index (RSI)

The 14-day RSI stands at 68.5, nearing overbought territory (70). While this does not yet trigger a sell signal, the RSI’s divergence from price action—where RSI peaks at 68.5 while prices continue upward—hints at potential exhaustion. A close below 60 would signal weakening momentum, though this is more likely to occur if the KDJ oscillator’s overbought condition resolves first.

Fibonacci Retracement

Key retracement levels from the July 2025 low (61.12) to the August 2025 high (85.52) include 76.62 (38.2%), 79.4 (50%), and 81.28 (61.8%). The current price (84.84) is approaching the 78.5–81.28 cluster, where prior support/resistance levels (August 11–12) congregate. A break above 81.28 would target the 85.52 psychological level, but a rejection here could trigger a test of the 76.62–79.4 range.

Backtest Hypothesis

A backtesting strategy employing MACD golden cross signals and a 5-day holding period showed mixed results. While the most recent golden cross on August 12 generated a 5.83% gain within five days, historical data from March 2022 demonstrated a modest 0.16% return, underscoring market context’s role. This suggests the strategy’s effectiveness is contingent on broader market conditions, such as the S&P 500’s performance (20.86% over the same period in 2022). Integrating Fibonacci retracement levels and RSI divergence could enhance the strategy’s robustness by filtering overbought entries.