Next boom for Zoom? ARK thinks so!

NASDAQ:ZM   Zoom Video Communications, Inc
Zoom Video Communications, Inc. is an American communications technology company that videotelephony and online chat services through a cloud-based peer-to-peer software platform and is used for teleconferencing, telecommuting, distance education, and social relations.

Evidence of the fact that $ZM is a Covid-19 play: Zoom’s share price has dropped in the wake of positive news about a coronavirus vaccine. On 9th November, $ZM stock dropped 15% in pre-market hours and is down 32% since the news.

Despite this, in quarterly results released Nov. 30, Zoom beat company and analyst estimates for its fiscal third quarter, with revenue up 367% year over year to $777.2 million, representing its third consecutive period with triple-digit percentage growth.

It is clear that investors are worried about $ZM being overvalued, hence its massive sell off form its $580 highs, likely set by fears about whether the company can maintain its success after people return to offices and schools.

The hybrid (some working form home and some working in the office), is likely to stay for some time. Zoom is great as it is cheaper than in-person meetings, especially for traveling, faster due to less travel time and more convenient.

Interestingly, Cathie Wood has been buying Zoom significantly in recent months. ARK invest has began buying $ZM for its ARKK ETF just 2 days before its ATH . Since then, ARK has been ‘buying the dips’ significantly with Zoom. For example, buying $13,500,000 worth of shares in for its ARKK fund in early November when the stock dropped 25% in two trading sessions and buying a further $32,000,000 shares in early December when the stock plunged 15% after earnings . As a result, the weighting of Zoom in the ARKK ETF has increased form 0.99% in mid-October to 1.53% now.

Let me explain the technicals. Firstly, ZM has been trading down and has been bouncing of a downward resistance line from its ATH . Secondly, the price has now retraced the 0.5 Fibonacci retracement zone, taking the $100 low and $588 highs, and is now sitting between the 0.5 and 0.618 level. This zone is often used by Fibonacci traders as a buy zone after a retracement. Thirdly, the price is currently approaching $325, which is significant as a large gap was created here on big earnings . Highlighted on the chart by the red rectangle . Gaps are often filled, but this is by no means universally true. Thirdly, there is some support to be found in an upward trend line formed from price action between April and May. Fourthly, the 200 period MA is aligning with this trendline which could act as further support. Finally, the RSI is approaching overbought levels.

Taken together, what does this mean? This could signify a reversal somewhere in the green circle – this is an area of bullish confluence given the gap fill, fib retracement level, support of the upward trendline, support of the 200 MA and the oversold RSI
Comment: I have posted an update on my profile on what I think is next for Zoom.


Oversold* not overbought!