Looking to trade Zoom Video ($ZM) on this pullback? I’ve got your plan! (August 13, 2020)
ZM QQQ CLOU IGV ZM
Zoom Video ( NASDAQ: ZM ). First of all, what I had drawn here on this line was just this series of lower lows that were showing kind of increasing selling pressure. But at the same time, we are getting kind of a fairly decent support level right there.
The stock broke through that level a couple of days ago on Tuesday and then it recovered a bit and now it’s up over 4 percent; while the QQQs ( NASDAQ: QQQ ) are up only .3 percent. And then Cloud Computing ( NASDAQ: CLOU ) is up 2 percent. The software is up not even 1.5 percent. So what I am saying is, today, right here right now, Zoom Video ( NASDAQ: ZM ) is attracting buyers. And then to other box here is this trading range. I am going to go ahead and clean this up so you can really see what’s happening.
I will tell you why I am doing this in just a second; the stock traded below this line here, which really marked this support and, then it quickly recovered. This is on volume; this is a big move down on volume. It broke a lot of hearts, right? Then the very next day it recovered, it didn’t even test this low here. And then today the stock actually gapped and held. In fact, for those of you who are close observers, the low of the day was the gap, was the opening; 238.15 is where it opened; the low, 238.15. So this is a stock that is running higher; this looks really, really good.
What I was telling our members today was, you can buy this stock right here. But how much, when the 50-day moving average is right overhead here at 249.00, how much of a head start are you getting by buying here under the assumption that the stock is going to run above the 50 and then keep going? You are not really getting that much of a head start on it, you don’t really have much of a price advantage. Because what can sometimes happen is, the stock can run up here and you are happy you are making a percent or two percent and then it turns right back around because the 50-day moving average rejected it; that’s where the sellers are.
What I am saying is, I would suggest watching this stock. If it starts trading above 250.00, that’s back above the 50, then you can start dipping a toe. You can maybe take a little bit of stock, but my sense of this chart is, it is probably going to take it a while. It is probably going to take it a while to kind of grind around for a while, I don’t know if it’s this long, but that’s just my sense. At the very least maybe the stock runs around here. I wouldn’t be too impatient with loading the boat for Zoom ( NASDAQ: ZM ). But I also wouldn’t be selling the stock just because it broke down here. Sometimes the most bullish thing that a stock can do is recover from a broken pattern, so we are still kind of working on that right now.
Also, and this is important, definitely keep your stop below this level. If you buy this stock, fine. But if it turns around and falls to a new low, that’s your signal to get out. That would be a small loss, but if you don’t sell there, then where are you going to sell? Here? No, you are going to want to see the stock get back up there. But let’s say it doesn’t do that, instead, it goes there, you don’t sell and before you know it it’s down here and you’ve got a massive loss on your hands in a trade that was supposed to be just kind of a low-risk trade, so don’t do that. Focus on risk management and also time your entries a little better.
Free Chart