Why Is Rocket Mortgage Falling?

04/17/25 02:07:45 PM

by Stella Osoba, CMT

It was just announced that Rocket Companies Inc., (RKT) would acquire Redfin Corp (RDFN), an online real estate brokerage firm in an all stock deal valued at $1.75 billion.

Security: N/A
Position: N/A

Figure 1 is a daily chart of RKT after the all stock deal for RDFN was announced. The chart shows that after making a V-shaped bottom in January 2025, the price appeared to be in an up-trend, rising from a low of $10.06 in January 2025 to a high of $15.90 in early March 2025. The announcement of the purchase of RDFN sent the stock falling on March 10, 2025 after a gap down (see Figure 1).

Figure 1. Daily chart for RKT.

Graphic provided by: StockCharts.com.

Figure 2 shows a daily chart of Redfin (RDFN), the company that is the target of RKT's acquisition. Here, the chart is acting very differently from RKT's chart. It actually surges, gapping up in the process (see Figure 2).

Figure 2. Daily chart for RDFN.

Graphic provided by: StockCharts.com.

This price action is completely normal. When an acquisition is announced, the stock price of the acquiring company usually falls temporarily, while that of the target company rises. The reason for the fall of the acquiring company stock is that it is usually believed that the company will pay a premium for the target company. In this case, RKT has offered through an all share deal up to $12.50 per share. RDFN closed on March 7 at $5.82 per share which is over an 80% increase in the price at the close at the end of the previous week.

So the surge in RDFN is not a reason to buy the shares because the rise is likely to be just as temporary as the fall in RKT's share price.

Figure 3. Weekly chart for RKT.

Graphic provided by: StockCharts.com.

Figure 3 is a weekly chart showing RKT's entire price history since it began trading. Note the negative divergence between price and the MACD (in the panel below price). Though this is bearish for the stock, it does not necessarily signify anything other than a likely dip in the near term share price. With the wider market in a rout because of tariffs and other economic missteps, now might not be the time to initiate new long positions. But putting this stock on your watch list could pay off in the medium term.

Stella Osoba, CMT

Stella Osoba is a trader and financial writer. She is a frequent contributor to "Technical Analysis of Stocks and Commodities" magazine and "Traders.com Advantage" as well as other financial publications.


E-mail address:	stellaosoba@gmail.com

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Why Is Rocket Mortgage Falling?

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