Zoom Video Communications, Inc. (NASDAQ: ZM) seems to be poised for a price surge as per its latest charts. The company provides a unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa.
The company offers Zoom Meetings that offers HD video, voice, chat, and content sharing through mobile devices, desktops, laptops, telephones, and conference room systems; Zoom Phone, an enterprise cloud phone system; and Zoom Chat enables users to share messages, images, audio files, and content in desktop, laptop, tablet, and mobile devices.
Bullish Indications
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock has been recently forming a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as purple color lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. Currently, the stock looks poised for a breakout from the symmetrical triangle pattern.
ZM – Daily Chart
#2 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#3 Bullish RSI: The RSI is moving higher from oversold levels and is currently nearing 50 in the daily chart. This indicates possible bullishness.
#4 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a strong support level. This level is marked as a pink color dotted line. This looks like a good area for the stock to move higher.
ZM – Weekly Chart
#5 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart as well, and is also moving higher from oversold levels. This is a possible bullish indication.
#6 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart, indicating bullishness.
#7 Bullish RSI: In the weekly chart as well, the RSI is currently nearing 50 and moving higher. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of ZM above the price of around $68.40.
TP: Our target prices are $73 and $77 in the next 3-6 months.
SL: To limit risk, place stop-loss at $65.80. Note that the stop-loss is on a closing basis.
Our target potential upside is 7% to 13% in the next 3 to 6 months.
For a risk of $2.60, our target rewards are $4.60 and $8.60. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the symmetrical triangle pattern with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara
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