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Strong Jobs Report Creates Juice For the Market Wednesday
Strong Jobs Report Creates Juice For the Market Wednesday

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.

Shares of Zoom Video  (ZM) - Get Free 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 Free 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.