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Should you Buy Zscaler After the Selloff?

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Surprise Trader veterans understand that it’s not all about the headline number. Guidance is what really moves a stock. You can hit on top and bottom line but if things looking forward are set to slow down, that forward PE is now at risk. Guide lower when you trade at 61x and it’s look out below.

That’s exactly what happened with Zscaler (ZS - Free Report) after this earnings report Tuesday after the bell. The cloud security company reported EPS of 88 cents versus 69 cents on revenues of $592.9 million versus $568 million. Big beats on both numbers but the EPS guidance for Q1 fell about a dime short of expectations, despite increasing revenue guidance. ZS finished the regular session off 3.4% at $193.19, closing below its 200-day moving average after failing to break out from it last week.

When the news hit the wires, ZS shares tumbled under $165. That’s right near the swing low from last quarter’s report and the first Monday of August when the Yen carry trade exploded. As terrible as it must feel for shareholders right now, this is the level where ZS was trading about a year ago, but it’s still well off the 2023 lows under $85. However, there are a few bag holders from over $370 in November 2021.

Moving Averages: Bartosiak starts by examining the stock's moving averages, such as the 50-day and 200-day moving averages. He points out the significance of crossovers and divergences between these averages, which can indicate potential trend changes.

Support and Resistance Levels: Bartosiak identifies key support and resistance levels on the chart. These levels act as barriers that the stock price must breach or hold above, providing traders with critical decision points.

Chart Patterns: He discusses chart patterns like head and shoulders, cup and handle, or flags, and their relevance in predicting future price movements. These patterns can offer valuable insights into potential bullish or bearish trends.

Volume Analysis: He emphasizes the importance of volume analysis in confirming price trends. An increase in trading volume during a breakout or breakdown can validate the significance of a price move.

Dave Bartosiak's technical analysis approach adds depth to our understanding Zscaler’s stock chart. By paying attention to moving averages, support and resistance levels, chart patterns, technical indicators, and volume, he equips investors with a comprehensive toolkit for making well-informed decisions in the stock market. Remember, while technical analysis is a valuable tool, it's important to consider other factors like fundamental analysis and market sentiment before making investment choices.


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