Redfin Corporation (RDFN) shares rose more than 7% during Wednesday's session after Wedbush reiterated its Outperform rating and raised its price target from $26 to $28 per share. The analyst believes that new pricing announced late last year will create better-than-expected transactions and brokerage revenue per transaction during the year.
At the same time, the Mortgage Bankers Association's Market Composite Index showed a 30.2% increase in seasonally-adjusted loan application volume. The Refinancing Index also rose 43% from the previous week and is 109% higher than the same week a year ago. The strong start to 2020 comes as the 30-year fixed mortgage rate hit its lowest levels since September 2019.
In December, DA Davidson analysts upgraded Redfin stock from Neutral to Buy with a price target of $25 per share. Analyst Tom White said that the company's mortgage and title business could generate up to $55 million in EBITDA by 2025 and represent up to 40% of revenue. The analyst also cited the company's strong listing share trends.
From a technical standpoint, the stock broke out from a rising wedge pattern to fresh 52-week highs. The relative strength index (RSI) moved further into overbought territory with a reading of 80.36, but the moving average convergence divergence (MACD) experienced a bullish crossover. These indicators suggest that the stock could see some near-term consolidation, but the long-term outlook remains bullish.
Traders should watch for some consolidation above trendline resistance at $22.50 or prior highs at $23.47 before resuming its uptrend. If the stock breaks down from those levels, traders could see a move to retest trendline support at $21.46 or the 50-day moving average at $20.70, although that scenario appears less likely given the bullish momentum.
The author holds no position in the stock(s) mentioned except through passively managed index funds.