Zillow Group Surges 7.82% in Two-Day Rally as Bullish Indicators Highlight Key Support and Resistance Levels

Zillow Group C (Z) has experienced a 7.42% surge on the most recent session, marking a two-day rally of 7.82%. The price action suggests strong buying pressure, with the stock trading near its recent high of $87.55. Key support levels appear to be forming around the $80–$81 range, while resistance is evident at $85–$87. A breakdown below $80.50 could trigger a retest of prior lows, while a sustained breakout above $87.55 may extend the uptrend.

Candlestick Theory

The recent bullish pattern resembles a "Bullish Engulfing" formation, where a large green candle engulfs a smaller red candle, signaling a potential reversal from bearish to bullish momentum. The price has also shown a "Higher High and Higher Low" structure over the past two weeks, indicating a strong uptrend. Key support at $80.08 (August 21 close) and resistance at $85.78 (August 14 high) are critical to monitor for potential continuation or reversal signals.

Moving Average Theory

The 50-day moving average (approximately $77.50) has crossed above the 100-day ($75.00) and 200-day ($70.50) lines, confirming a medium-term bullish trend. Short-term momentum is aligned with the 50-day MA, which currently sits below the 200-day MA, suggesting a "Golden Cross" scenario. However, the 200-day MA remains a significant psychological barrier; a close above $85.27 (50-day level) could validate a long-term bullish bias.

MACD & KDJ Indicators

The MACD histogram has turned positive, with the MACD line crossing above the signal line, reinforcing a short-term bullish bias. The KDJ (Stochastic) indicator shows the stock entering overbought territory (K=85, D=75), suggesting a potential pullback. Divergence between the KDJ and price action—where the price makes new highs but the oscillator fails to do so—may indicate waning momentum.

Bollinger Bands

Volatility has expanded as the price approaches the upper Bollinger Band (current width: ~$5.00). The bands have narrowed to a "squeeze" pattern in early August, which typically precedes a breakout. The current position near the upper band suggests heightened volatility, with a possible reversion toward the 20-day moving average (~$82.50) if the squeeze resolves.

Volume-Price Relationship

Trading volume has spiked on the recent rally, particularly on August 22 (5.45 million shares) and August 21 (1.94 million), validating the price surge. However, volume has not yet reached multi-month highs seen in late April (9.0 million shares), which may imply limited follow-through buying. A decline in volume during further rallies could signal exhaustion.

Relative Strength Index (RSI)

The RSI has surged to 72, entering overbought territory, which historically suggests a 60–70% probability of a short-term correction. However, given the stock’s strong fundamentals and recent momentum, the RSI may remain elevated for several sessions. A drop below 60 would indicate weakening momentum, while a retest of 70 could confirm a continuation of the uptrend.

Fibonacci Retracement

Applying Fibonacci levels from the May 22 low ($64.03) to the August 14 high ($85.78), key retracement levels include 61.8% at $74.50 and 50% at $74.90. The stock’s recent pullbacks have found support near these levels, suggesting they could act as temporary floors during corrections. A breakdown below the 38.2% level ($73.20) would increase bearish probabilities.

Backtest Hypothesis

The proposed strategy of buying at MACD golden cross and holding for 10 days yielded a 26.96% return, underperforming the benchmark’s 32.99%. While the strategy’s 0.31 Sharpe ratio indicates suboptimal risk-adjusted returns, the maximum drawdown of 0.00% (likely a data anomaly) suggests no significant downside during the test period. The underperformance may stem from the stock’s recent overbought RSI and high volatility (22.24%), which the strategy does not account for. Integrating volume confirmation and RSI thresholds (e.g., holding only when RSI <70) could improve results by filtering false breakouts.