An apology…and an analysis of Zoom Video ($ZM). (July 06, 2021)
ZM
I am kind of liking Zoom ( NASDAQ: ZM ) here. I have been shaken out of it a few times and as I look at it I probably deserve being shaken out of it. You can see where it’s been trending lower, I get it, and then now it has started to move higher. But for whatever reason, you see the way this thing was looking back in January and into February, this to me was looking pretty good.
Here’s a trading lesson that I have to pass on to you, that I wasn’t really thinking about. Well, I kind of did think about it at the time but then just decided, in my infinite wisdom, that it really didn’t matter. And that is, that this stock had a monster move, a monster move up to $600.00. Whereas a year before that it was like 60.00 or 70.00, this was a monster move. Once the bloom kind of came off the rose and the stock drifted lower, fell below the 50 and then kind of held at the 100, and then below that. So you can look at this and say, man, that was a 40 percent retracement. Fine, but it went from $70.00 up to 600.00, 40 percent off the top is really not that big of a deal.
And the fact that it took place from the very top to where I was looking at it here on the breakout, and it took 3-1/2 months, that is not enough time for a high-flier like this that had broken, that has been broken. It’s not enough time for it to repair itself and start moving higher. Again, it’s not just the depth of the drop here, it’s the length of time, it’s the duration of the rally, and it is the magnitude of the rally. When you’ve got a monster stock like this, it has run like that, it’s not just going to correct over a couple of months and then run back up to regain its former glory, it’s going to take a while.
I kind of screwed up on this deal, I’m pretty sure I lost money on it, I tend to play things really tight. I do not take large losses, not even one, I haven’t in years, because I used to take several and then I realized I was working for free. I would literally be working making money doing really well, then I’d take one right in the shorts, lose a bunch of money, and then have to spend 2 years trying to make it up. Does that make me a good trader? No, it makes me a stupid trader. So I do tend to keep losses very, very small, and I got shaken out here.
You can see what’s happening now, this is March and we are into April. Look at the moving averages. The 100 is the green, the 200 is the blue, and the 50 is the red, look at the way they are going. Green and red are trending down, the 200-day is still moving up. However, this is just a function of math, the longer a price stays below the 200-day moving average, which it is now, the more apt the 200-day moving average is going to start trending down, all it takes is 200-days.
You can see this has kind of been slowly rolling over. It will still roll over even if this comes up a little bit it is still going to roll. So here we are into May. Now we’re back down, this doesn’t look like anything now. Back here it looked like a lot, in January it looked like we could have a nice move. Here, it doesn’t look like it at all. Now we are into June, we’ve got this coming up here, hey, it’s going to break out. There it was, there’s the breakout. Yes, there it is again. Here it is, now we’re going. Now we’re going, and finally, we are up here.
So we got a little breakout but that was then, what are we going to do next? What is the bull’s next magical trick? I think the way you trade this, first of all, you have got to look at it. The 50-day moving average is under the 200-day moving average. The 50-day moving average is under the 100-day moving average. So this is the furthest thing from a healthy stock. You want to see a healthy stock with this type of configuration, all this way. The price above the 50, the 50 above the 100, the 100 above the 200, and they are all drifting higher.
This isn’t doing this, this is a little bit of a different type of deal, right? Well, let me show you something that is really kind of cool. If you look at this on a moving average matrix, it is just something that I have developed and I have seen other people do it so this is not a Dan Fitzpatrick production by any means, but if you look at this you will see what this thing looked like when it was really trending higher. You can see this really nice ribbon here in these moving averages. But since it rolled over this has been kind of a mess.
So what I would suggest doing on this is, if you like to follow this kind of thing, fine. But this is the way I would interpret this. I would need to see, in order to feel really good about this, I would need to see the stock just continuing to stay above this line and kind of stay out of this mess of moving averages here. What you want to see, you don’t want to see the price kind of oscillating within these moving averages, back and forth and up and down and all of that.
What you want to see is, the stock rising above this and then finding support with all of these different moving averages. The stock is going to move back down, back and forth, it’s not going to be perfect. You are not going to say, oh, the 50-day moving average is holding like a charm. It is going to break down sometimes.
The same thing with the 100-day or the 200-day or the 20-day. You are going to get this, which is why I like using this matrix, as I call it. So you want to see this price, if you are going to hold it, if you are going to be long, it has got to stay above these moving averages. If it doesn’t do that, then being long, you are probably going to be shaken out, just like I was before.
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