Five Star Stock Watch: Zillow, Inc.

Zillow's rise from $25 earlier this year to north of $100 back in September was tremendous, to say the least. However, the last several months have not been as kind.

After dropping by as much as 30 percent since that $100 peak, has Zillow's slide possibly come to an end? Judging from the chart below, it sure looks that way.

Related: Five Star Stock Watch: Netflix

The company: Zillow, Inc.

Ticker Symbol: (NASDAQ: Z)

Sector: Financial  

Industry: Property Management

Zillow, Inc. engages in the operation of a real estate and home-related information marketplace on mobile and the Web in the United States. The company owns and operates Zillow.com; Zillow Mobile, a suite of home-related mobile applications; Zillow Mortgage marketplace, where borrowers connect with lenders to find loans and get mortgage rates; Zillow Digs, a home improvement marketplace for consumers to find visual inspiration and local cost estimates, and Zillow Rentals.

Please take a look at the one-year chart of Zillow below with added notations:

The amazing thing about Zillow's declining wedge formation is how clearly defined it is. For example, the wedge support has been perfectly tested on six different occasions.

Declining wedges are bullish patterns, but traders would typically want to wait for confirmation of the pattern before acting. As you can see from the chart, Zillow has confirmed the pattern this week and should be moving higher from here.

Related: Five Star Stock Watch: Google

Zillow is set to release earnings on February 10, 2014.
 

No matter what your strategy, or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!