Zscaler Inc. (ZS) beat Wall Street's fourth-quarter earnings forecast but sees slower revenue growth over the coming year. Let's check out the position of the charts and indicators of the cloud security stock to see if this makes Zscaler's stock price vulnerable to a deep decline.
In this daily bar chart of ZS, below, I can see that prices have rallied into the $160-$170 area about three or four times since June. Each rally failed and prices retreated. ZS is trading above the bottoming 50-day moving average line and above the bottoming 200-day moving average line. The trading volume has declined since June and suggests that traders have gravitated away from ZS as it is stalled in a sideways pattern. The On-Balance-Volume (OBV) line shows a different trend and a bullish conclusion with signs that buyers of ZS have been more aggressive than sellers. The trend-following Moving Average Convergence Divergence (MACD) oscillator has just inched above the zero line for an outright buy signal.
In this weekly Japanese candlestick chart of ZS, below, I see a positive-looking picture that still needs an upside breakout to restart the uptrend. Prices are trading above the rising 40-week moving average line. The OBV line is in an upward trend and confirms a bullish view. The MACD oscillator is in a bullish alignment above the zero line. Some upper shadow and a spinning top pattern suggest there is risk to the uptrend.
In this daily Point and Figure chart of ZS, below, I can see that prices have reached an upside price target of $157.
In this weekly Point and Figure chart of ZS, below, I can see an upside price target in the $225 area.
Bottom line strategy: ZS is trading about $2 lower in the pre-market here on Wednesday and that is disappointing to the bulls but not the end of the world. Another rally failure would be disappointing and my broad market view is for stock prices to decline into 2024, so anything could happen.
In my July 10 article on ZS I wrote, "Traders should be long. Raise stops to $135 from $120. The $179-$185 area is my first price target now." Traders should now raise stops to $142 and let's see how things play out.
