Chart Of The Day: Is Zoom Video The Ultimate Coronavirus Safe Haven Stock?
Investing.com | Apr 02, 2020 09:57AM ET
As the broader market cratered, shares of Zoom Video Communications (NASDAQ:ZM) soared. While the S&P 500 dived 34% in just over a month, falling from its Feb. 19 peak to its March 23 bottom, remarkably, Zoom shares gained 65%.
As opposed to the situation for most other global and U.S. companies, the coronavirus outbreak has been something of a blessing for the San Jose, CA-based company. It specializes in remote conferencing services via a platform that enables video, online and/or mobile chats and collaborations.
It's the perfect application, it seems, for the current lockdown environment in which social distancing is crucial, but businesses must figure out some way for employees to continue working together. Ironically, COVID-19 has become the marketing tool the company couldn't ever have imagined.
Indeed, Zoom has become the roads and bridges of today, enabling people to 'move' from place to place, for commerce; modern business infrastructure if you will. One doesn’t have to be an analyst to appreciate the value.
Zoom is now the recipient of yet more publicity, albeit this time the negative kind. Reuters today reported that Tesla (NASDAQ:TSLA) founder and CEO Elon Musk banned his SpaceX employees from using Zoom because of security concerns, after reports surfaced via the FBI of hackers "zoombombing" university session conducted via Zoom. NASA has followed suit.
Might this impede the stock's eye-popping rise? From a technical perspective, Zoom could decline on profit taking, before retesting highs.
Shares of Zoom have been on the rise since late January. The supply-demand balance completed a continuation pattern, which propelled prices to the $160 level, where the trend paused.
A bull-bear struggle might be forming another continuation pattern, if the price rises from the dotted to the solid line. That would demonstrate that contracts between buyers and sellsers are changing hands in a more urgent manner, till the two forces meet and explode.
Should the blow-up be to the topside, it would signal another leg higher for the uptrend. If it's to the downside, that would suggest there's more profit taking ahead before investors are willing to commit more money, likely retesting the uptrend line in the process.
It's worth considering too, that the broader market may fluctuate significantly for quite some time, which will almost certainly affect ZM. When that occurs, it would be interesting to see whether the stock will have become the coronavirus safe haven, by demonstrating a negative correlation to the market throughout the duration of the pendemic.
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Note the two lows within the current possible triangle: the March 24 low ($134.00) and the April 1 close ($137.00) are whole numbers, which is rare, demonstrating technical influence.
h2 Trading Strategies/h2Conservative traders would wait for either a bounce off the uptrend line or an upside breakout, followed by a return move that retests the pattern’s support, before going long.
Moderate traders are likely to wait for the same: either a return move toward the uptrend line or an upside breakout, followed by a return move—for a better entry, not necessarily for poof of trend.
Aggressive traders may enter now, provided they understand the risks.
Trade Sample
- Entry: $137
- Stop-Loss: $134
- Risk: $3
- Target: $155
- Reward: $18
- Risk:Reward Ratio: 1:6
Note: this post is about Zoom Video Communications, not Zoom Technologies (OTC:ZOOM), the Chinese technology and communications holding company which catapulted over 1,500% in March, when investors mistakenly bought shares of the wrong company.
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