How Zoom Video Can Continue Its Insane Rally on Earnings Beat

Zoom Video is up more than 200% so far in 2020 despite the carnage we've seen in the overall market. Here's how the stock can continue even higher.
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Shares of Zoom Video  (ZM) - Get Report are off to the races Wednesday, up 5% after better-than-expected earnings.

What more can we say about this stock? Shares are up more than 21% this week alone, while boasting a one-month gain of 58% and a year-to-date gain of more than 220%.

From the fourth-quarter lows, Zoom stock is up more than 250% and with the coronavirus pandemic shifting how individuals and businesses communicate, it’s no surprise Zoom continues to surge. That’s even with increasing pressure from Microsoft  (MSFT) - Get Report.

Despite elevated expectations, Zoom delivered with a top- and bottom-line earnings beat, as sales grew 169% year over year. In addition, it blew the roof off on guidance.

Management guided for second-quarter revenue of $495 million to $500 million, crushing estimates of just $224.4 million. They expect full-year sales in the range of $1.775 billion to $1.8 billion, well above consensus estimates of $939.7 million.

These aren’t just solid beats - this is an annihilation of estimates.

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Trading Zoom Stock

Daily chart of Zoom stock.

Daily chart of Zoom stock.

Zoom stock is a volatile one, even though its general trend has been higher. Amid that run, there have been various corrections ranging from 15% to 30%.

But the volume we’ve seen over the past few days — as buyers bid up shares ahead of and after earnings — has been very, very impressive.

After breaking out over $180 this week, shares have cleared $200, which was the three-times range extension as measured from the Q4 low to its prior 2019 high.

Preferably, bulls will see this three-times range extension and $200 mark hold as support. Should it break, investors will turn their attention to the 20-day moving average and the $180 mark as possible support levels.

While a pullback seems unlikely after such strong guidance, keep in mind the volatility that can be experienced in Zoom stock.

On the upside, my first area of interest is near $228, where the stock will find its 361.8% extension. Above that and the four-times range is up near $246. To put it simply, keep an eye on $225 and $250 on the upside.