Can Zoom Break Out Over Resistance After Strong Earnings?

Zoom Video beat earnings and revenue estimates and raised its full-year outlook. But can it clear resistance?
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Zoom Video  (ZM) - Get Report just can’t seem to find its mojo. The stock has bounced around a bit on Wednesday and was about flat on the day after reporting earnings on Tuesday.

The company easily beat earnings and revenue expectations, while also raising its full-year outlook for both metrics.

With the company clearly doing well (and well enough to raise its full-year outlook), it should ease investors’ concern about the back-to-work trend as employees head back to the office.

Zoom Video was one of the very few stocks that rallied almost immediately during the COVID-19 decline. Investors knew right away that this company - which already had a strong business - should see an explosion of growth.

And that’s exactly what happened, with shares rallying hundreds of percent as a result.

In that context, it’s not surprising to see the stock struggling a bit. Zoom is down more than 40% from its October high. It also topped much sooner than the rest of the growth stocks, although that didn’t stop investors from selling it during the recent decline.

Will earnings change the trade?

Trading Zoom Video

Daily chart of Zoom Video stock.

Daily chart of Zoom Video stock.

After Zoom Video topped out in October, shares embarked on a painful downtrend into January. The stock found support around $330, narrowly avoiding the gap-fill at $325, and bounced hard.

Shares broke out over downtrend resistance (blue line), before eventually rallying to $445 and retreating. This area again acted as resistance a few weeks later, cementing it as a key level going forward.

Notably, we’ve seen the $330 area shift from support to resistance.

So while Zoom Video stock has done a good job bouncing from the May low near $273 and reclaiming the 10-day, 21-day and 50-day moving averages, it has been unable to push through the $330 zone.

With such solid earnings, bulls were hoping this would not only remove earnings as a risk, but have the event actually act as a catalyst for the stock. In effect, having earnings shift from a headwind to a tailwind.

That might happen, with a delayed response like we’re now seeing with Nvidia  (NVDA) - Get Report.

For now though, $330 and the 21-week moving average are clearly acting as resistance. If Zoom pushes through these marks, the 200-day moving average is in play.

If it can’t, see that the stock’s short-term moving averages act as support. If they fail to do so, sub-$300 could be in play again for Zoom. After such a solid quarter and a great outlook, a retest of the low seems unlikely for the moment, provided the market doesn’t endure a larger correction. 

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