Zillow (Z) up big today! Time to buy? Look at supply. (February 13, 2017)
Lets look a Zillow ( NASDAQ:Z ), and here is why: The stock was up over 2 percent today and you might say, “Wow! This is a sign of strength. This was the bottom. Time to buy.” Okay, I don’t think that is the way you want to go. Earnings are not an issue, they have already reported earnings, which is why the stock traded down like this. But, the stock has a lot of resistance overhead. All this supply, all of these folks that bought in this red box, are losers. Up until around here, this was a pattern that had really strong possibilities. If the stock started breaking above this upper Bollinger Band on volume you could see a really nice move up. It was kind of a cup and handle type thing. Certainly not perfect, but you could see that this was a high base that was forming just below this level.
So the idea is, don’t anticipate the breakout, WATCH for the breakout. If it happens, you see it, because again, you are watching for it. This is a SETUP. No, it is a FUTURE trade. No it is not. It is a setup, it is not a trade. It is NOT a trade, it is just a setup. You are waiting for the setup to actually give you a buy signal and it never did. So the stock keeps moving, still has not given you a buy signal, still has not. And then finally we get earnings, the stock trades lower, now this is just a little reflex buying action here. Here is the thing: If you are buying Zillow ( NASDAQ:Z ) now I would suggest that you may want to consider you are just stuck on the stock. For whatever reason you are fixated on the stock.
This is all resistance up here. This is one of those where I would rather buy the stock at $41.00 than I would 35.00. Because at least at $41.00, or we can just keep it a little bit lower, right around there. At this level we know the stock is breaking out, we know it is going higher because traders are telling us so. They are pushing the stock all the way through this resistance area. But until it gets above there, this is the level that controls. So the most aggressive, frankly, I think you should be is to watch the stock, not to buy it. Just watch the stock. The least aggressive you should be, set an alert here like I am doing: buy?, lets go 39.50. Okay, for the next month, if this thing trades above 39.50 I am going to get this thing hitting me and I will then be able to consider whether to buy the stock. Until that time Zillow ( NASDAQ:Z ) doesn’t even get my attention.
Think about it this way: Setting an alert like this is like having a trading assistant and you are saying to your assistant, “Let me know if the stock trades up close to $40.00. Until that time I don’t care about it.” Anyway, that is how you look at a stock like Zillow ( NASDAQ:Z ). You don’t buy in anticipation. You wait until the stock is TELLING you it is time to buy. Right now, it is not telling you squat.