Signal Says Bet Big on the Zoom Video Stock Pullback

Year-over-year, ZM remains up over 39%

Digital Content Manager
Jul 15, 2021 at 3:41 PM
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Pandemic darling Zoom Video Communications Inc (NASDAQ:ZM) is down 0.8% at $357.73 this afternoon, after Benchmark initiated coverage of the security with a "hold" rating. Zoom stock has been cooling off on the charts since its Oct. 19, all-time high of $588.84, which had many wondering whether or not the software name could make it past Covid-19. The shares of Zoom still boast a 39.8% year-over-year lead, though, and have recently pulled back to a historically bullish trendline that could push Zoom stock back up the charts in the coming weeks. In other words, for our contrarian minds, now looks like the perfect opportunity to jump on ZM's next leg higher.

Specifically, Zoom stock just came within one standard deviation of its 40-day moving average, after spending several weeks above this key trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, four similar signals have occurred in the past three years. Zoom stock enjoyed a positive return one month later in 75% of those cases, averaging a 24.6% gain. From its current perch, a comparable move would put ZM back above the $382 mark.

ZM 40 Day

Sentiment towards Zoom stock was mostly tepid coming into today. Of the 18 analysts in question, 10 carry a tepid "hold" rating. Should some of that pessimism begin to unwind, shares could go even higher.

Now looks like an opportune time to speculate on Zoom stock's next move up the charts. ZM's Schaeffer's Volatility Index (SVI) of 38% stands in the low 6th percentile of readings in its annual range, indicating options players are now pricing in low volatility expectations for the security. Plus, Zoom stock's Schaeffer's Volatility Scorecard (SVS) sits at an elevated 94 out of 100. This means ZM has exceeded option traders' volatility expectations during the past year -- a boon for premium buyers.

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