Thanks to the coronavirus, work-from-home and remote stocks have been spiking on ballooning demand. This includes names like Zoom Video (ZM) - Get Report, DocuSign (DOCU) - Get Report and at one point, Slack.
Still, the company has churned out solid growth. In its most recent quarter, the company beat on earnings and revenue estimates, growing sales by almost 50% year-over-year and turning in break-even bottom-line results.
However, billings came up slightly short of expectations — $218.2 million vs. $226.3 million — which seems to be causing Wednesday’s beating. That could be a buying opportunity for patient investors, even if analysts are slashing their price targets.
Trading Slack Stock
Now below $25, it’s hard to believe that just a few days ago this name was bumping its head against $35. However, a quick pullback sent shares back below $30 and the 20-day and 50-day moving averages ahead of earnings.
With Wednesday’s decline, Slack stock gapped below the 200-day moving average and short-term uptrend support (blue line).
For now, it’s clinging to a key retracement area near $24.50. If measuring from the March low to the pre-coronavirus 2020 high, the 61.8% retracement comes into play near this mark. If measuring from the March low the post-coronavirus high, the 38.2% retracement comes into play near this level.
In either case, this is a key area for traders to keep an eye on. If it holds, look for a rotation back through Wednesday’s high at $25.83. Above that puts the 200-day moving average back in play.
Should the $24.50 area fail to hold as support, the 50% and 38.2% retracements are in play near $22.80 and $21, respectively. It would take another painful 18.5% decline from current levels, but should Slack get to $20, it should be met with strong support.
I thought the report was good, but clearly the market’s opinion is different. Let’s see if this support area holds up, giving dip buyers a better risk/reward setup. Otherwise, investors have to be open to more downside.