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Fake-Out Breakout in Zoom Video? Here's the Level to Watch

Zoom Video has given up its post-earnings gains. Will shares retreat further? Here's the level to watch.

Zoom Video  (ZM)  has to be a disappointment for the longs, with shares now flat on Tuesday after the company reporting earnings.

The company erupted onto the scene, going public in 2019 but really hitting its stride in 2020 due to the pandemic.

Shares rallied from the mid-$60s at the start of the year to almost $600 at its highs in October. Since then, however, it’s been struggling.

Zoom Video stock rallied more than 9% on the day before earnings, which admittedly makes a further rally even more difficult. However, shares were still 30% off the highs, so bulls were hopeful a further push could send it higher.

Despite a top- and bottom-line beat and better-than-expected guidance from Zoom Video, the stock just couldn’t hold the morning gains. 

The stock opened higher by more than 7%, but topped out within the first 60 seconds of trading. 

Even higher price targets from the analysts don't seem to be helping. Let’s look at the charts to see what could be next.

Trading Zoom Video

Daily chart of Zoom Video stock.

Daily chart of Zoom Video stock.

In January, I was looking for a gap-fill near $326 and a test of the 200-day moving average for a dip-buying opportunity. That would have put Zoom more than 40% off its highs and gave us a couple of reasons to pull the trigger.

Too many traders must have been watching the same thing and instead of that leading to failure, it actually led to neither situation triggering. Zoom bottomed near $331 and bounced hard from there.

However, shares couldn’t push through the $440 to $450 zone, which is exactly where it failed on Tuesday with its post-earnings rally.

This has been the line in the sand for Zoom Video stock, as it has acted as both support and resistance for several quarters now.

If Zoom can’t push through this mark, let’s see if it can maintain above the 100-day moving average - something it’s failing to do on Tuesday. If it can hold above it, then $445 remains in play.

Above $445 not only puts the stock above a key level, but also above its key moving averages.

Below the 100-day keeps the 50-day moving average in play, followed by the 200-day, which was support in February.

Ultimately, I like Zoom on a clean breakout or on a deeper decline. Regarding the former, bulls want a move over $450 and above last month’s high, putting $500 in play.

On the downside, Zoom becomes much more attractive on a deeper correction. The 200-day moving average would be nice, but a gap-fill toward $326 and a test of the 50-week moving average is even more enticing.