ZS is testing a historically bullish trendline on the charts
Zscaler Inc (NASDAQ:ZS) stock has pulled back sharply from its Nov. 3 three-year high of $336.99, last seen down 0.6% to trade at $241.86, heading for its 12th loss in the last 14 trading sessions. Now looks like a good time to buy in on the dip, however, as the cybersecurity stock is testing a historically bullish trendline on the charts.
Per Schaeffer's Senior Quantitative Analyst Rocky White, ZS is within 0.75 of the 320-day moving average's 20-day average true range (ATR), after remaining above it 80% of the time during the past two weeks and 80% of the last 42 trading sessions. This signal has occurred eight other times over the past 10 years, after which the stock was higher one month later 75% of the time with an average 10.5% gain.
A move of similar magnitude would halve ZS'S 20% quarterly drawdown. Another bullish case is Zscaler stock's 14-day relative strength index (RSI) of 13.3, firmly in "oversold" territory, which often precedes a short-term bounce.
An unwinding of pessimism amongst options traders could give the shares a lift as well. Though calls are still outweighing puts on an absolute basis, ZS' 10-day and 50-day call/put volume ratios at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks higher than 83% of 84% of readings from the past year, respectively.
Amid a post-earnings volatility crush, options are affordable. ZS' Schaeffer's Volatility Index (SVI) of 39% which stands higher than just 16% of all other readings from the past year, implying that near-term option traders are pricing in relatively low volatility expectations.