Zoom Stock Set to Blow Past Technical Ceiling

Options bulls are circling Zoom stock

Deputy Editor
Aug 5, 2021 at 2:41 PM
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The shares of Zoom Video Communications Inc (NASDAQ:ZM) are flat this afternoon, last seen down 0.1% at $400.26 . The stock is coming off yesterday's 6.9% surge, and earlier today hit a one-month high of $403. This region has acted as a ceiling for ZM since early March, but there's reason to believe a breakout from this consolidation pattern could be right on the horizon for the video chat stock. 

According to data from Schaeffer's Senior Quantitative Researcher Rocky White, ZM just came back within one standard deviation of its 40-day moving average after a lengthy period above the trendline. White's study shows Zoom stock has made a similar move five other times. One month after these instances, the security was higher 75% of the time, averaging a sizable 24.6% return. Should ZM stage a move of comparable magnitude from  its current perch, it could put the equity back within reach of the $500 level -- a region it hasn't touched since late last year. 

zm chart aug 5

Options traders are already on board for a rebound it would seem. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Zoom stock sports a 10-day call/put volume ratio of 4.72, which stands higher than all other readings from the past year. This implies options traders are picking up calls at a much quicker-than-usual clip. 

This penchant for these bullish bets is being echoed in today's trading, where call volume is running double what's typically seen at this point, with 86,000 calls across the tape so far today. The two most popular contracts are the weekly 8/6 410- and 400-strike calls, with positions being sold to open at both. 

While it's still a ways out, Zoom is scheduled to enter the earnings confessional at the end of the month, after the close on Monday, August 30. A quick look back at the stock's post-earnings history over the past two years shows a number of outsized moves, including a 15% drop in December 2020, and a 40.8% after its last second-quarter report. Regardless of direction, ZM averaged a next-day swing of 12.2%. 

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