Is Redfin a buy at $41.80?

Redfin (NASDAQ: RDFN)  - the real estate brokerage company - had a great Q2 2020. Revenue increased by 8% y-o-y to $214 million. The company did book a $4 million operating loss but that was down from $12 million in the same quarter in 2019. The ultra low mortgage rates are benefiting the company. But given the pace of home sales there's very low levels of available homes for sale.The company has provided good guidance for the third quarter. 

Exhibit: Redfin had a down day today, but the stock may not have hit bottom

 

(Source: Tradingview)

There could be support for the stock at around the $41 level.  If the stock drops below the support level at $39, that may be a very bearish sign for the short-term. On the upside there could be resistance for the stock at $43.65. My limit order got triggered today at $41.80 and it ended the day at $41.70. If it passes $43.65 it could go to new all-time highs. Majority of the Wall Street analysts are neutral on the stock with a target of $39.50.

(Disclosure: I own Redfin)   

     

Why I bought Charles Schwab at $33.14 on Aug 7, 2020

Entry Price: $33.14

Trade Date: Aug 7, 2020

Potential Exit Points: Near the top of the Bollinger Bands at around 35.70 or wait until after the next earnings (October 19, 2020) and exit after collecting the dividend.  

Charles Schwab (NYSE: SCHW) is one of the largest brokerage firms in the country. A wave of consolidation across the industry is putting Schwab at a dominant position. In the near-term, Schwab faces pressure on its revenues due to the zero interest rate policy (ZIRP) of the Federal Reserve. The ZIRP is impacting Schwab's net interest margin, but it is having a positive impact on the number of trades executed. People everywhere are hungry for yield. Charles Schwab has also been successful in growing its asset base at a long-term growth rate of 6% due with its deft use of acquisitions to bolster assets.  The companies with the largest asset bases will survive and Schwab with $4 Trillion in assets will be one of those survivors. 

Exhibit: Schwab Growing New New Assets at around 6%

(Source: SeekingAlpha)

The consolidation in the industry will leave very few large players dominating the industry. Schwab recently acquired TD Ameritrade and Morgan Stanley acquired E*Trade. I am hoping to hold on to Schwab until after the next quarterly earnings and the dividend payment, which I anticipate would be a good one. 

From a technical analysis point of view, I am not fully convinced this is the perfect trade. The Simple Moving Averages are screaming a sell while some of the oscillators are signalling a buy. Overall the technical indicators are flashing a sell signal.  

Exhibit: Charles Schwab Technical Indicators - August 8, 2020 

(Source: Tradingview) 

The stock was trading near the lower price range of its Bollinger Bands and had a double bottom. That, along with the fundamentals, is what prompted me to buy the shares. 

Exhibit: Charles Schwab's Double Bottom

(Source: Tradingview) 

(Disclosure: I own Charles Schwab)