Check out Zoom Video ($ZM). It’s working…kinda. (March 16, 2020)
ZM SP-500 ZM MSFT ZM
This is a real bloodbath, there’s no real letup here. Every day seems like the bottom and then the very next day we go, crap, I guess it’s not the bottom. It is a money-sucking environment and I am trying to get you through it without too much damage here. We’ve really been in cash here for quite a while here and I have been urging patience; I don’t know what is going to happen, I am not going to tell you that I do; I will specifically and fiercely tell you that I don’t. The market is broken. In today’s Strategy Session I am talking about Breadth Indicators and various other things, they are kind of at historical levels here and the market is still going down. I will just say this, there is going to be one heck of an opportunity we just don’t know when; it could be tomorrow, it could be 3 weeks from tomorrow or 6 weeks from tomorrow.
If I was a betting man, and I am not, actually not, I would say in 3 weeks, literally, I am looking at mid-April, April Fools, it’s probably going to be a day for fools. But I am looking at 3 or 4 weeks is when I think we are really going to start to see some clarity because things are going to get worse on the Coronavirus thing before they get better. Even if they are actually not worse, I don’t know whether they are or not, it’s not my deal, but with all the testing, they had an issue with testing and now that seems to be resolved but I don’t know, that’s just what I hear. But with more testing there’s going to be, oh my god, there’s an increase. Well, no. It is just more discovery, it’s been there.
And so the market is going to have to sift through that. We are going to have to get through all the idiots on CNBC, none of who actually trade. I am not talking about the “traders” like the Fast Money guys, I don’t watch that show, but just some of the commentators, I won’t say who they are because I know most of them. They are talking about closing the markets and stuff like that; that’s the dumbest thing I have ever heard. You don’t close the markets, it’s like an ostrich sticking its head in the sand to get away from all the lions and tigers that are out there wanting to eat it. The only thing that happens is the head is eaten last on that deal.
The markets are trading and I would say, frankly, they are trading orderly ( INDEXSP: .INX), they really are. Circuit breakers are being hit, that’s what circuit breakers are for. I would say these markets are trading orderly. The reason they are down so much is because of all the unknowns. This is not an oh crap Mnuchin and his string bikini high heeled wife were cocktailing down in Cabo and Mnuchin calls in and says, “By the way, I checked with all the banks and there is no liquidity crisis”. And people are freaking out going, “What, I didn’t know that was a possibility, sell, sell, sell.” This isn’t something stupid like this. This is a big unknown.
Markets hate uncertainty; I would say this is a function of price discovery in the midst of fact discovery. All the facts are not out there and because of that the fear, the hate, whatever, of uncertainty that traders have is being seen in the charts. But I will tell you this, first of all, take a breath. It’s the flu it’s the flu. If you have it chances are you are going to recover. Chances are that the old fart that you just met, who’s been smoking for 30 years or I’ll say it, the young guy, whatever, who just happens to have it bad, somebody is going to die from it. But the chances are it’s not going to be you. Hope springs eternal life is good. Life will go on; we are not going to die as a planet regardless of what all of these idiots are saying. So this idea of closing the markets, that is almost like signifying a bottom right there. When I hear people talk about that I am going, “Oh my god. I have got to step in and buy. The idiots are now running Mensa, but we are not there yet.
I hadn’t planned on this video going so long; I was going to tell you the Zoom Video ( NASDAQ: ZM ) is a good stock to hold. I have been holding it, it’s the only one I am halfway comfortable holding. Instead, I am going off onto this thing but that’s me, I’m a wordsmith. The bottom line is this, what you are forgetting about is the x-axis, the time axis. It takes time for bottoms to form, where ever it is. If it is here, it certainly wasn’t here. Maybe it will be down here, maybe it will be down here, I will have to change the chart resolution. But at some point we are going to get a bottom, we are going to get more zigzags. A low is going to hold and none of them have so far. This one didn’t hold. This one didn’t hold. This one didn’t hold. Maybe this one will or not. But at some point we are going to get some stabilization.
And I am telling you if you have cash on the sidelines, and by the way, if you are full up in stock and you don’t have cash, I hate to tell you this but I am going to, don’t sell now, it’s too late. It is too late to sell; just suck it up, ride it out. And then resolve that the next time this type of thing starts happening you get out early. And what is early? I will tell you when like I told you here and I am not the only guy, I know Mark Minervini was telling people I think even before the S&P ( INDEXSP: .INX) broke the 50-day moving average, sell, sell, sell. And it’s because all these stocks were breaking down even though the index held up. So you have got to be paying attention to this type of stuff. But all you are doing now is locking in a big loss. Just suck it up, ride it out and you are going to be fine.
The rest of you, if you have cash you are in the “catbird seat” because you don’t have to make money tomorrow or next week or next month. You really don’t. You have cash. What you have got to do is wait. I would rather wait 5 months and make a double than wait a day and make 10 percent. I care about the big bucks not the little chippies here. Not the little pennies and nickels on day trades so I want you thinking that way too.
Let’s look at Zoom Video ( NASDAQ: ZM ). What I like about this is that the stock is holding up. Look at the relative strength line on this. Relative to the S&P ( INDEXSP: .INX) this thing is crushing it. It is, literally, the only stock that I am comfortable holding. I own some Microsoft ( NASDAQ: MSFT ), the way this thing is going I will probably be out of this stock in the next couple of days. If this support level does not hold, I am down on it a little bit but I am hanging onto it just because it hasn’t been down enough to hit my stop. And from a relative strength standpoint actually this has been doing pretty good too. But from 190.00 down 27 percent, if you were long at the top you are down 27 percent all the relative strength in the world isn’t going to make you feel better so don’t join me on that trade.
Zoom ( NASDAQ: ZM ), as long as this stays above 105.00, 100.00 on the absolute max, I would say you are good to go. This is a stock that is supposed to do well in a “social distancing” thing. As a homebody and a hermit, I live my life in social distance. Now everybody else is catching onto my trend. This is a stock that is working. I am not looking at all of these other distance lines down here; I would say as long as the stock stays above 104.00 I think you are good to go. But if it falls below then I wouldn’t be owning it but I think this is an okay one to get.
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