Zscaler (ZS) has benefited from a greater need for online security during the Covid-19 pandemic. Indeed, the stock has surged dramatically higher since March, but beneath the surface the indicators have weakened.
Let's check out the charts of the cloud security name.
In the daily bar chart of ZS, below, we can see that the shares have been in an uptrend. The rally this month did not take the stock to a new high and now prices are moving down toward a potential test of the rising 50-day moving average line. Prices are more than 50% above the rising 200-day moving average line so they can be considered overbought or extended if you like that term better.
Trading volume has been very light this month and the On-Balance-Volume (OBV) line has begun to turn lower telling us of a shift from aggressive buying to aggressive selling. The 12-day price momentum study has weakened from September to October telling us that the uptrend is "losing steam."
In the weekly Japanese candlestick chart of ZS, below, we can see some bearish signals. The most recent two weeks are a bearish engulfing pattern. This top reversal pattern has a pretty good track record of "nailing" tops.
Trading volume has declined into October and the OBV line could be peaking here. The MACD oscillator is close to a bearish crossover to the downside.