Does Zoom Have More Upside Room?

The company is set to report earnings as the stock soars higher.

During Friday's Mad Money program Jim Cramer took a look at some of the companies that are reporting earnings this week. On Tuesday, we get earnings from Zoom Video Communications Inc. (ZM)  , one of the red-hot stocks that are thriving in our stay-at-home economy.

Let's check out the charts of ZM and see if we can launch a technical strategy.  

In the daily bar chart of ZM, below, we can see that the stock more than doubled from the October-January base pattern around $70. Prices are above the rising 200-day moving average line and above the rising 50-day moving average line. The 50-day line has been acting as support and buyers have shown up every time it has been tested in the past two months.

The trading volume has been more active since March and tells you that traders and investors have been attracted to the stock. The daily On-Balance-Volume (OBV) line moved up to a high in late March telling us that buyers were acting very aggressively but it has diverged bearishly from the price action since that high. The OBV line has moved sideways as prices have continued to climb. The price action could ignore this bearish divergence.

The trend-following Moving Average Convergence Divergence (MACD) oscillator turned bullish in January and made a peak so far at the end of March. The movement of the MACD oscillator is also diverging from the price action, but again this may be ignored by traders and investors.

 

In the weekly bar chart of ZM, below, we do not have a lot of price history to work with but it is bullish. Prices are above the rising 40-week moving average line.

 

The weekly OBV line is more constructive than the daily line and the MACD oscillator has been very bullish since February. 

 

 

In this daily Point and Figure chart of ZM, below, we can see the rally and a potential upside price target in the $238 area.  

 

 

Bottom-line strategy: The last time we wrote about ZM was back on April 7 as it was experiencing a selloff. The shares found buying interest at the 50-day moving average line and our stop suggestion was not reached.

 

Traders who are long ZM should raise stop protection to a close below $150 -- the recent low. If earnings Tuesday propel prices higher, $200 (as a round number) and $238 are our next price targets. 

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