If any company represents the unprecedented social, economic and technological disruptions of the coronavirus pandemic, it would have to be Zoom Video Communications.
The teleconferencing stock not only joined the Nasdaq-100 in April. It’s also the index’s top gainer in 2020, up about 600 percent. Its market cap of $138 billion ranks it ahead of venerable names like
QCOM
,
UNP
and
CVX
.
But that’s also resulted in valuations that dwarf most other companies. ZM’s triple-digit price-to-sales and price-to-earnings ratios exceed most other widely traded stocks. (Aside from a few biotechs.) This may create the risk of profit taking or rotation into other corners of the market.
ZM’s price action could already be showing signs of fatigue.
First, the weekly chart. Last week was both an inside week and a spinning-top candle stick. Both are potential reversal patterns.
Next, the daily chart shows a descending trendline since September 23. While patterns like this can be bullish (like Nvidia), it’s a little concerning with a stock so far above any clear support lines.
Third, ZM has been losing relative strength as the market’s bounced. It’s mostly flat since the September 24 low, while the S&P 500 and Nasdaq-100 have advanced more than 5 percent.
Finally, MACD has crossed lower and is now falling.
In conclusion, ZM might not fall right away. But it could be losing its shine. Tech investors may see it as a source of funds and shift toward chips and Chinese tech stocks, which continue to gain relative strength.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
The teleconferencing stock not only joined the Nasdaq-100 in April. It’s also the index’s top gainer in 2020, up about 600 percent. Its market cap of $138 billion ranks it ahead of venerable names like
QCOM
,
UNP
and
CVX
. But that’s also resulted in valuations that dwarf most other companies. ZM’s triple-digit price-to-sales and price-to-earnings ratios exceed most other widely traded stocks. (Aside from a few biotechs.) This may create the risk of profit taking or rotation into other corners of the market.
ZM’s price action could already be showing signs of fatigue.
First, the weekly chart. Last week was both an inside week and a spinning-top candle stick. Both are potential reversal patterns.
Next, the daily chart shows a descending trendline since September 23. While patterns like this can be bullish (like Nvidia), it’s a little concerning with a stock so far above any clear support lines.
Third, ZM has been losing relative strength as the market’s bounced. It’s mostly flat since the September 24 low, while the S&P 500 and Nasdaq-100 have advanced more than 5 percent.
Finally, MACD has crossed lower and is now falling.
In conclusion, ZM might not fall right away. But it could be losing its shine. Tech investors may see it as a source of funds and shift toward chips and Chinese tech stocks, which continue to gain relative strength.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
