Trading Strategies for Zoom Communication Stock Before And After Q4 Earnings

Zoom Video Communications, Inc ZM was trading near 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. 20, the stock was highly volatile the following day, sliding over 4% lower at one point before closing the trading session flat. The stock then continued in its uptrend, which brought Zoom to a high of $74.77 on Dec. 27.

For that quarter, Zoom reported revenue of $1.137 billion, which slightly beat the $ 1.12 billion consensus estimate. The company reported earnings per share of $1.29, beating a consensus estimate of $1.08.

On Jan. 18, Exane BNP Paribas analyst Stefan Slowinski downgraded the stock from Neutral to Underperform with a price target of $60 on Jan. 18, 2024. This analyst has an accuracy rate of 72%. Read more here... 

For the fourth quarter, analysts estimate Zoom will print EPS of $1.13 on revenues of $1.131 billion.

From a technical analysis perspective, Zoom’s stock looks bearish heading into the event, having settled into a downtrend pattern on the daily chart and working to print a shooting star candlestick. 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.

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Traders and Investors looking to play the possible upside in Zoom stock but with diversification may choose to take a position in the AXS 2X Innovation ETF TARK. TARK is an actively managed double-leveraged ETF aiming to return 200% of the daily performance of Cathie Wood-led ARK Innovation ETF ARKK, the latter which holds a 4.55% weighting of Zoom.

For traders bearish on Block, AXS Short Innovation Daily ETF SARK. SARK is an actively managed ETF aiming to inversely track the daily performance of ARKK.

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The Zoom Chart: Zoom started trading in a downtrend on Dec. 27 and on Jan. 30, the stock closed under support at the 200-day simple moving average (SMA), causing the trend to accelerate. The most recent confirmed lower high was printed on Feb. 15 at $64.73 and the most recent lower low was formed 60.14 mark on Feb. 21.

• On Monday, Zoom spiked up about 1.5% at one point but sellers came in and caused the stock to fall back down toward Friday’s closing price. The price action had Zoom working to print a shooting star candlestick, which could indicate the local top has occurred and more downside is on the horizon.
• Bullish traders want to see big bullish volume come in following Zoom’s earnings print and then for the stock to regain the 21-day exponential moving average (EMA) as support. If that happens, Zoom may work its way back up to the 200-day SMA.
• If Zoom suffers a bearish reaction to its earnings and falls under the eight-day EMA, selling is likely to accelerate again and the stock may continue in its downtrend. If that happens, the 200-day SMA will cross under the 50-day SMA, causing a death cross to form on Zoom’s chart.
• Zoom has resistance above at $64.93 and at $69.04 and support below at $63.06 and at $60.62.
  

Photo by Austin Distel on Unsplash