SLRK

ZM - Falling Knife or Buy?

NASDAQ:ZM   ZOOM VIDEO COMMUNICATIONS INC
Stellar performance and a covid-19 pandemic hero, Zoom has had mind-boggling performance in 2020. However since the vaccine news are out and the world tries to return to normal the stock has lost steam.

This poses the question, is stock a story of the past or is it a buy-the-dip situation?

Well from a valuation perspective and if we believe the analyst consensus the stock should be valued at around $469 (+20%). However, a closer look at the ratios supporting this thesis I can only find very little sense of buying the stock. But this seems the case for many stocks these days. So my personal conclusion would be, this is a stock to swing trade and not for investing.

What I am looking at;
* The stock only started significantly moving in March 2020, so this is my time frame
* On this timescale the Fibonacci retracement levels ( esp . 78% and 61%) have shown significance in support and resistance
* The stock is was approaching the 50% Fib levels in Jan, which coincides the gap higher following Aug 2020 earnings , and is reversing since towards the 61% level
* Price seems to have positively broken a convergence of the longer-term uptrend and the correction that started in October 2020
* MACD seems to have bottomed out showing a bullish reversal trend forming
* RSI is in the 50 levels, i.e. in neutral territory

* On the upside I see resistance around $430 (R1), $470 (R2) and $500 (R3) . Personally I believe R2 is achievable, however R3 and new all time highs won't be unless something changes materially.

I will be looking to trade the stock pre March earnings release;

Buy Limit $395
SL $370
TP $469 (Analyst est.)

***The comments above are my personal view and do not represent investment advice. Risk management is key, do not trade what you cant afford to loose***

Trade active
Trade closed: stop reached: SL triggered in yesterdays sell off.

$370 levels seem to have acted as support.

Will not buy back in for now and see how the stock develops.

Comments

This is indeed an interesting trade idea. We're curious to see what others write in the comments. It's been featured on Editors' Picks!
200coins
+1 Reply
SLRK TradingView
@TradingView, highly appreciated! Looking forward to and highly encourage discussions... We never stop learning!
+1 Reply
Technically Speaking, ZM may fall further below 375 levels and its Stop Loss for buying should be below 360 levels. There will be more chances of stronger bounce back if it bounces from 360-70 levels. Else a bigger time frame correction will always be due on its charts and this may further gets into trouble at higher levels.
So, my take on it is that we should wait for higher time frame and time wise correction to be completed and then enter long into it even if we have to buy at some higher levels.

Disclaimer: This is my views only based on my chart study and not a recommendation for buy or sell.
+5 Reply
Nice idea! I still think ZM is a long
+3 Reply
Good analysis 👍🏽. One thing to consider is once ZM announces S&P inclusion, stock will jump , how much? That’s something we will find out. ZM is and will become a household name for years to follow. Thanks!
+2 Reply
SLRK StreetTalent
@StreetTalent agree. Let‘s see how much room@to the downside the stock has before possibly reversing. Will continue to monitor and provide updates along.
+1 Reply
My question is... why such weakness in the last 6 months of trading? Seems to be more than just a "correction".
+2 Reply
SLRK turtlebuster
@turtlebuster, appreciate your comment.

The stock stared weakening the moment the vaccines were announced and considering the massive and parabolic bull run this kinda makes sense. The world is longing to get back to "normal", i.e. less Zoom and more physical contact. As a result of this underlying growth of ZM will inevitably start to slow and this will have an effect on already overstretched fundamentals.

So in the long mid to long run I agree with you, ZM has probably seen its peak. However, my trade is based on the assumption that the stock won't go quietly and that the "back to normal" is still a few months out at best.
Reply
You'll be getting stopped out tomorrow
+2 Reply
Awesome analysis ❤❤
+1 Reply
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