The long and the short on Zillow (Z). (May 04, 2016)

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I want to look at Zillow ( NASDAQ:Z ) here in this Free Chart video, and this is why: The company reported great earnings, I read a couple articles about it. Gosh, if I didn’t own a home I’d probably want to go to Zillow ( NASDAQ:Z ) and buy one. Everything looks great. By the way, Pulte Home ( NYSE:PHM ), looks like this could be starting to move as well. It looks like one of these energy stocks (that’s just a random thought that I had). You’re buying the stock here, keep a stop just a little below there. That works (call that a bonus). Anyway, with this, a breakout and a move to about $29.00 or so, something like that, right at the open. And then the stock trades as high as almost $30.00, and then the stock is down.

Now, I could look at this and say, “Alright, this is a screaming short.” And frankly it does kind of look that way, to tell you the truth. But, I would be remiss in not pointing this out: Short interest, 26.34, what does that exactly mean? It means that if only the shorts were covering it would take them like 26 days, with what the volume is, in order to be covering their shorts. That’s a huge short interest, which is about like 21 percent of the float. It is what it is. The reason I’m pointing that out is a couple things. First of all is the short interest that I gave you, that can be as much as two weeks old, it’s not like they publish it every single day. If you short stock you don’t have to phone it into the NASDAQ and say, “Oh, put me down for 1000 shares.” So the data is lagging data. I would say though, that a lot of this was just due to shorts covering their positions.

My suggestion would be this: If the stock is trading lower than it is right now, 28.08, if it starts trading lower this red box here would really be my target zone. In other words, looking to short this stock now because it’s just overbought and volume was huge and the close was lower than to open basically at the low of the day. So I would be looking for this to fill all or at least some of the gap here, so this would be my target where I would close my short. In other words, cover my short and buy the stock. And then if you’re doing that you have to look at your downside with respect to the loss you could take. Your green box here is where you would cover if the stock starts moving against you. And I show you that because this is a pretty significant number. If this is indeed a short squeeze this will continue to go up tomorrow. Those are your two levels, just don’t violate those levels, because when you do it typically doesn’t work out really well for you, but it does for the person on the other side of your trade.

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