My family’s group chat turned into a “Zestimate” fest the other day — with me, my parents, and all four brothers competing to see who’s up the most on their house.
If you didn’t already know, Zestimate is a term coined by Zillow (Z), a popular real estate platform. It’s essentially Zillow’s estimate of your home’s value.
If you’re a homeowner, you probably struggle to resist ogling your Zestimate every day and feeling like a genius.
My house, for example, which I bought back in 2019… is up over 100%. (If you’d told me that back then, I would’ve bought two houses.)
With numbers like these, it gets tempting to sell. Though, you then run into the dilemma of having to buy at these elevated prices, too.
But despite these surging home prices, and the “Zestimate” becoming a weekly ritual for homeowners across the U.S., shares of Zillow have cratered 80% since early 2021.
After such a massive decline, you may think it’s time to buy the dip in Zillow. Before you rush into any trade, though, you have to check two things.
First, my Bank It or Tank It analysis…
And second, the star of this week’s special limited series, the Greed Gauge.
Your Price Target for a Zillow Rally
Before we dive into Zillow, some important notes on the market.
I expect a bear market rally in the coming weeks. We should see a quick, but huge rally in the markets as the selling pressure lets up.
Over the longer-term, though, I think we see more weakness. That’s the general outlook I laid out last week to guide us through this bear market.
I’m looking for similar action in Zillow — a short-term rally that leads into more weakness. And I think the chart below shows just that…
(Click here to view larger image.)
Let’s start with the red and green lines on the chart.
The lower green line is around $48 a share, or 20% above the current price. Up until about mid-April, that line acted as support. Now it’s resistance.
The upper red line is around $60 a share, or 60% above the current price. That was the former resistance for Z since it went public late in 2021.
Since we’re looking for a bear market rally any week now, we can use these key levels as price targets.
The green line is feasible. The red line is a big stretch to hit — but bear market rallies are unpredictable, especially with beaten-down stocks. Anything could happen.
If Zillow does wind up trading near that $60 range, consider that the end of the rally. At that point, I’ll be looking to add put options all day long…
Because Zillow’s stock could easily fall back under $40 in the weeks that follow.
Now, let’s consult Mike Carr’s Greed Gauge. That’s the green and red bars at the bottom.
When the Greed Gauge is green, it’s time to be bullish. When it turns red, you want to sell.
This confirms my thinking that we want to be bullish on Zillow — for now.
As soon as Mike’s Greed Gauge turns red, that’s a strong sign to take your profits, get out, and wait for another quick drop.
Now, bear market rallies are one of my favorite ways to capture quick gains. But they don’t happen across the board.
Only a select number of stocks experience this quick pop. And you don’t want to get caught chasing the wrong rally.
Luckily, the best tool to spot the right rallies is almost here…
Don’t Trade the Bear Market Rally Without This
Mike was the first person I reached out to when the markets started tanking. He’s been through this before, and I’m confident he’ll guide everyone out of this in the best way possible.
And it’s all thanks to his latest innovation, the Greed Gauge.
This might sound crazy… but the Greed Gauge made money in 7 of the last 9 market downturns… all without touching a single put option.
That’s right. The Greed Gauge is all calls, all the time. And that’s thanks to its ability to catch spikes of greed right before they happen.
Right now, I’m certain the Greed Gauge signal is triggering on plenty more stocks… Because in my view, a bear market rally is just around the corner.
To get a sneak peek at how this game-changing indicator works, sign up for Greed Gauge Revealed right here.
Mike’s sharing new insights about his invention every day leading up to the big event next week. Be sure to sign up now and secure your spot.
Regards,Chad Shoop, CMT Editor, True Options Masters
Chart of the Day:Euro-Dollar Parity Is Inevitable
By Mike Merson, Managing Editor, True Options Masters
(Click here to view larger image.)
We’ve been watching the euro downtrend for quite some time…
I pointed out several months ago that the euro had broken down from its 2021 head and shoulders pattern.
I expected the euro to fall all the way down to its former range around 1.08. What I didn’t expect was for the downtrend to continue, and even hasten, all the way toward U.S. dollar parity (the green line above).
The euro is in a steep downtrend right now. It also happens to be coming up against that steep resistance line as the dollar is beginning to consolidate just after breaking 5-year highs.
In short: bullish dollar, bearish euro. This likely means more pain in equities for quite some time…
But at least a getaway to Italy is as cheap (relatively speaking) as it’s been since 2017!
Regards,Mike Merson Managing Editor, True Options Masters