As Zoom Video Communications continues to struggle, more bearish patterns have appeared on the chart.
First, the recent price action has resulted in a descending triangle, with support around $309. This is a classic continuation pattern, pointing to potentially more downside in coming weeks.
Second, the 50-day simple moving average (SMA) is about to cross below the 200-day SMA. In other words, a “death cross.”
Third, notice how volume has been lower on the green days. Also notice the large bearish engulfing candle on March 2. That’s especially noteworthy because it followed a strong earnings report. It was the second straight quarter that good news was met with selling – another potentially bearish sign.
Finally, other important numbers remain a problem for ZM. Its price/earnings ratio is a whopping 75x and price/sales is 34x. Meanwhile, Treasury yields keep rising and coronavirus infections have fallen. In other words, ZM was a very effective way to play the pandemic. But as that moment seems to fade, it’s a very expensive stock suited to a very different market.
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