How to Trade Zoom Video When It Reports Earnings

Zoom Video has been trading incredibly well, hitting new 52-week highs ahead of earnings. Here are the key levels to know for the stock now.
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Zoom Video  (ZM) - Get Report has been one of if not the coronavirus play for investors this year.

The stock didn’t dip in March like the rest of the market. In fact, shares were red-hot coming into March, held up amid the initial coronavirus selloff, then exploded higher on the realization that communications platforms like its own were going to become the norm.

Everyone from family and friends were using Zoom, as well as classrooms and board members.

With the exception that no one would or should want a pandemic, this is about the best thing that could have happened to Zoom business. That was proven when the company reported earnings and blew expectations out of the water.

To no surprise, the stock has reacted in kind to this year’s catalyst, up 350% so far in 2020. Let’s look at the stock charts ahead of earnings after the close of trading Monday.

Trading Zoom Video Stock

Daily chart of Zoom Video stock.

Daily chart of Zoom Video stock.

So far shares continue to trade well, with Zoom Video stock hitting new all-time highs in early Monday trading. However you want to look at the recent action though — stalling vs. consolidating — the stock has had trouble advancing higher.

With that said, I am not usually one to try picking a top in a momentum stock that’s at new highs. All we need to do is look at Tesla  (TSLA) - Get Report for an explanation as to why.

In any regard, what can investors expect on earnings?

On the upside, I want to see Zoom stock clear and hold the 361.8% extension at $312.62. That’s only slightly above current levels and will also put the stock back above prior uptrend support (blue line).

Technically speaking, a close above this mark will also put the four-times range extension in play up near $347.50. For these extensions, I am drawing from the April lows following the mid-March spike. It is in essence, Zoom’s coronavirus pullback.

On the downside, look to see if the 10-day moving average holds as support. Below puts the $275 area in play, as well as the three-times range extension at $277.76. Below that in the lower-$260s is the 50-day moving average.

Previously this has been an excellent buy-the-dip mark, although it did not hold as support earlier this month. Largely though, if Zoom dips into the $265 to $275 area, it may be a solid buying opportunity, particularly if the quarterly results are good.