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Buying Slack on Post-Earnings Fall? Watch This Level Now

Slack is getting crushed on Friday. Here's the must-watch level for bulls that are thinking of going long.

Slack  (WORK) - Get Slack Technologies, Inc. Class A Report is getting buried on Friday, down 18% after disappointing quarterly results.

Even in an uptrend and bull market, this type of action would be unnerving. The fact that it’s coming on a day when the markets are rallying amid a bear market makes owning Slack especially difficult.

A loss of 4 cents a share was narrower than expectations but the loss widened from a year earlier. Revenue of $181.9 million grew almost 50% year-over-year and beat estimates by more than $7.5 million.

Many pegged Slack - along with Zoom Video  (ZM) - Get Zoom Video Communications (ZM) Report - as so-called coronavirus plays, as businesses look to cut down on person-to-person communication and in-person meetings. For many, that’s why the selloff is surprising, as Slack stock plummets below its 52-week low.

Investors are clearly concerned about something, be it valuation or otherwise. Guidance for next quarter and the full-year was imperfect but not horrendous. Further, the business seems healthy.

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But that’s not what the market is saying. While the market has the potential to be wrong, we have to heed its cautions at the moment. Let’s look at the charts.

Trading Slack Stock

Daily chart of Slack stock. 

Daily chart of Slack stock. 

As you can see on the chart above, $20 support was nonexistent Friday morning. Slack stock knifed right through this area on its way to $16. There, buyers stepped in and have so far bid the stock higher.

For aggressive investors with a long-term bullish thesis on Slack, they can buy the stock with a stop-loss just below Friday’s low (assuming that is the low). However, for many investors the stock is simply too risky, and it’s hard to blame them. Particularly when blue-chip stocks with strong balance sheets are on sale too.

The risky bulls who do buy will look for the stock to maintain over prior downtrend resistance (blue line) and Friday’s low. Should it continue higher, they’ll want to see Slack stock rebound back toward $20. If it gets there, we’ll need to see if this former support mark is reclaimed or if it acts as resistance.

However, those bulls must know that if Slack stock loses Friday’s low, more selling pressure could ensue and there’s no telling where the bottom may ultimately rest.