Trading Strategies for Zoom Communications Stock Before And After Q4 Earnings

Zoom Video Communications, Inc ZM was trading flat on Monday, as the company headed into its fourth-quarter earnings print after the market close.

When Zoom printed its third-quarter results on Nov. 21, the stock gapped down almost 7% the following day and closed that session 3.71% lower. The stock then continued in its downtrend, which brought Zoom to a low of $63.55 on Dec. 27.

For that quarter, Zoom reported revenue of $1.102 billion, which slightly beat the $1.1-billion consensus estimate. The company reported earnings per share of $1.07, beating a consensus estimate of 84 cents.

Ahead of Zoom’s fourth-quarter print, RBC Capital analyst Rishi Jaluria maintained an Outperform rating on the stock and raised the price target from $85 to $95.

For the fourth quarter, analysts estimate Zoom will print EPS of 80 cents on revenues of $1.1 billion.

From a technical analysis perspective, Zoom’s stock looks bullish heading into the event, having settled into a possible cup-and-handle pattern on the daily chart. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

The Zoom Chart: Zoom may be working to complete a long-term cup-and-handle pattern, with the rounded-bottom cup formed between Nov. 15 and Feb. 7 and the handle of the pattern printing over the trading days that have followed. If Zoom receives a position reaction to its earnings print and the pattern is recognized, the measured move is about 33%, which suggests Zoom could eventually trade up toward $95.

• If the stock suffers a bearish reaction to the news, the downtrend in which Zoom has been trading since beginning to form the possible handle of the pattern could accelerate. Zoom’s most recent lower high within the downtrend was formed on Thursday at $75.04 and the most recent lower low was printed at the $72.19 mark on Friday.
• On Monday, Zoom was working to print a bearish Marubozu candlestick, which could indicate lower prices will come on Tuesday. If that happens, bullish traders will want to see Zoom hold above $72.20, which aligns with the 50-day simple moving average.
• Zoom has resistance above at $81.97 and $92.06 and support below at $72.96 and $64.93.

Read Next: Did You Know Zoom Video Has Beat Earnings Every Quarter Since Its IPO? Here's What Else You Need To Know Before The Q4 Report

Photo courtesy of Zoom.