Hot zone alert - May 20 2025
Your weekly guide to the the most promising trade setups in the stock market
Before anything else, a quick reminder:
You can still be a part of our beta and try out the new Trading Places online platform—where you can make full use of our Zone Algorithm—for free
Who here had a good week? Us too.
Turns out dialing down the tariff craziness could do wonders for the market.
BUT—don’t go closing those shorts just yet…
Because if stock futures are anything to go by, we might be in for another tumble. Concerns over the lower-but-still-high tariffs, plus the non-zero chance of the trade war flaring back up, could wipe these collective smiles off our faces.
So for this week’s alerts, we’re gonna focus on a few stocks that could shape up to be strong short candidates.
Let’s get to it.
New here? Welcome to Zone Alerts.
This is where we highlight stocks that are approaching key support and resistance zones and analyze where the action might lead.
These weekly alerts help you zero in on high-potential setups while keeping risk management in check.
What’s in this issue:
• This week’s three new hot zones
• What are zones?
Here’s what our zone algo picked up for you this week:
Carvana Co. (CVNA)
Consumer Cyclical • Auto & Truck Dealerships • USA • NYSE
View CVNA’s zones here
CVNA is currently retesting a major resistance zone from January 2021.
This is the same zone that once acted as the ‘shoulders’ of the H&S pattern CVNA formed back in 2021—which, if you recall, led to a massive breakdown later that year.
Good news: After about four years, it's finally recovered—thanks to that monstrous 100+% rally since April.
Bad news: This redemption arc might be losing steam.
CVNA is entering the zone not only on weakening volume, it’s also exhibiting a clear bearish divergence forming on the RSI.
The stock’s also been hovering around overbought territory (70-ish) for a few days now—even though it’s shown the potential to reach extreme levels (90 in a previous rally).
All this points to a potential reversal—where even a pullback down to just the November 2024 support zone could offer a 10+% downside.
3M Co. (MMM)
Industrials • Conglomerates • USA • NYSE
View MMM’s zones here
MMM’s July 2016 resistance zone is about as battle-hardened as they come.
In 2025 alone, it’s faced multiple attempts at penetration—and managed to withstand all of them.
In this latest retest, MMM has approached the zone with gradually rising—but relatively low—volume. This means that while there is growing interest during the rally, it doesn’t look like it’s enough to break through a zone this strong (or at least not yet).
RSI is also at 66 currently. Technically not yet overbought, but getting there. That said, MMM has sustained multiple days of 80+ RSI back in February… so we can’t rule anything out.
But based on what we’re seeing now, another bounce back to the December 2014 support could be more likely. That’s a 12-15% return if it plays out.
Zscaler Inc. (ZS)
Technology • Software - Infrastructure • USA • NASD
View ZS’ zones here
We’re getting exhausted just looking at ZS’ recent rally.
This near-vertical 50% run, which only started a few weeks ago, has brought the stock back to a familiar foe—the August 2021 zone.
Since the zone’s inception, ZS has only managed to beat it once (twice if you’re gonna count the recovery from a faux-breakdown back in February 2022—we won’t).
At the moment, ZS is attempting to break out of this resistance at extremely overbought conditions (RSI 78). It’s actually higher than the last time it retested this zone—and even that bombed.
Volume, while above-average, has been flat throughout this rally—a sign of indecision from traders.
We’re gonna need to wait a bit more before pulling any triggers here, but regardless of whether the move is headed down or up—it’s likely going to be big.
If it bounces hard, the trip back to the December 2020 support zone could net a whopping 20-24%.
WTF are Zones, anyway?
Zones are key price levels where the market has reacted strongly in the past—such as sharp reversals or sudden swings.
They’re areas where actual supply and demand met in the past, and likely will meet again.
“Why are these significant?”
Well, it all comes down to three key principles. We like to call them The Principles of:
When I Dip, You Dip, We Dip (aka psychology)
Traders are aware that others are watching these levels (zones) too. With everybody paying attention, this creates a self-fulfilling prophecy where everybody acts in anticipation of everybody else’s actions.
Markets Gonna Market ¯\_(ツ)_/¯ (aka technical factors)
If the first price rejection at the top of a zone was violent, it’s likely that buyers who entered at that level are now holding losses.
But with each retest, the rejection weakens, as there are fewer buyers remaining underwater. This weakens that resistance (or support for all you short-sellers), and could eventually lead to a break through.
Killer Whales (aka institutional plays)
Big players need liquidity in order to place massive orders without moving the market against themselves. So they wait for these zones, knowing a lot of us small fry (retail traders) will come to play.
This allows them to buy low or sell high without causing a lot of waves.
But remember: Zones are NOT guarantees but rather regions of increased probability for market moves. So always, ALWAYS use proper risk management.
Trading Places: Launch coming soon!
Stop obsessively refreshing your charts like it’s your ex’s Instagram.
By combining historical patterns with real-time market data, Trading Places identifies zones and assigns probabilities to each one—helping traders spot potential plays with higher chances of success.
It automates all of the curation, chart-plotting, and alerting for you, so you can actually have a life (or at least pretend to)!
Stay tuned!
Disclaimer: This isn't financial advice. This shouldn’t be news to you.