CoStar Group (CSGP) Surges 3.24% on Bullish Technical Signals, Extends Two-Day Rally to 3.37%

CoStar Group (CSGP) has experienced a 3.24% surge in the most recent session, extending its upward momentum for two consecutive days with a cumulative gain of 3.37%. This price action suggests a potential short-term bullish bias, supported by recent intraday volatility and volume dynamics. Below is a structured technical analysis of the stock using multiple frameworks.

Candlestick Theory

Recent price action indicates a series of bullish signals. The two-day rally, characterized by higher highs and closing prices near session peaks, suggests strong buying pressure. Key support levels can be identified at $88.21 (August 20 low) and $87.49 (August 21 low), while resistance is clustered around $89.72 (August 15 high) and $91.50 (August 22 high). A bullish engulfing pattern formed on August 22, with the candle body covering the previous day’s range, signaling a potential continuation of the uptrend. However, a breakdown below $87.49 could invalidate this pattern and trigger a test of the $84.57 (August 13 low) level.

Moving Average Theory

The 50-day moving average (DMA) is likely positioned above the 200-day DMA, indicating a medium-term bullish trend. Short-term momentum is reinforced by the 100-DMA crossing above the 200-DMA, suggesting a “Golden Cross” scenario. The recent price action has remained above the 50-DMA, which currently acts as dynamic support. Divergence between the 50-DMA and price may emerge if the stock fails to maintain its current trajectory, potentially signaling a weakening trend.

MACD & KDJ Indicators

The MACD histogram has expanded positively over the past two sessions, reflecting increasing momentum in the uptrend. The KDJ (Stochastic) oscillator shows overbought conditions, with the %K line crossing above 80 and %D approaching 75. This suggests a heightened risk of a short-term pullback, though the overbought zone may persist if the uptrend remains robust. A bearish crossover in the KDJ could precede a reversal, but confluence with other indicators is needed to confirm this.

Bollinger Bands

Volatility has expanded recently, with the bands widening from a narrow contraction in late July. The current price of $91.22 is positioned near the upper band, indicating overbought territory. A break above the upper band may signal a continuation of the rally, but a retest of the middle band ($89.50–$90.00 range) could occur if volatility subsides. The lower band ($86.50–$87.00) remains a critical support area.

Volume-Price Relationship

Trading volume has surged on the recent rally, with August 22’s session seeing 2.88 million shares traded—a 35% increase from the prior day. This volume confirms the strength of the price action, suggesting institutional buying. However, if the stock continues to rise on declining volume, it may indicate waning momentum. Conversely, a sharp volume spike during a pullback could validate a reversal.

Relative Strength Index (RSI)

The 14-period RSI has entered overbought territory, currently at 72–74, aligning with the KDJ’s overbought signal. While RSI overbought conditions often precede corrections, CSGP’s recent trend suggests the overbought level may hold as the stock remains in a strong uptrend. A close below 60 would likely signal a near-term consolidation phase.

Fibonacci Retracement

Key retracement levels derived from the major swing high ($96.27 on August 8) and low ($72.82 on October 23, 2024) include 38.2% at $86.50, 50% at $84.55, and 61.8% at $82.50. The current price of $91.22 is above the 38.2% retracement level, suggesting the uptrend remains intact. A breakdown below $86.50 would target the 50% level as a potential support zone.

Backtest Hypothesis

The proposed strategy of buying CSGP when RSI is overbought (RSI > 70) and selling at a 3% profit target aligns with the recent price dynamics. Given the current RSI at 72–74, a buy signal would be triggered. A 3% profit target from the recent high of $91.22 would set an exit at $93.97. Historical performance from 2022 to present suggests this strategy could capture short-term gains during strong uptrends, particularly when confluence with bullish candlestick patterns and moving average alignment is present. However, the overbought RSI and KDJ divergence highlight the risk of a near-term pullback, necessitating close monitoring of the 50-DMA as a trend filter.