Welcome to this blog post on techieinvestor on Sep 25, 2020. Today, I was asked what is the best trading strategy to play ZM at current levels. In this post, we are going to do a technical analysis of ZM using fib retracements and Gann Square of Nine trading strategy.
Lets get into technicals.
TC2000 Daily ZM Chart Sep 25,2020
As shown in the chart, when I draw the fib retracement from recent highs ( 529.74) to the low of that wave (387), we see the retracement happening at 50% levels.
Also, lets calculate the gann square of nine angle covered by the big wave from 387 to 529.74ZM4590135180225270315360387397407417427437448459470481492503514525537549561
Gann Square of nine angles
ZM, as we can see from the above table has covered an entire rotation and 225 degrees. As we all know, Gann angles, when in multiples of 90 in the US market, may lead to big retracements. In our case, since it has not covered 270 degrees in the second rotation. there is a possibility of this stock heading up. But when is the question.
Now, let’s get to retracement gann square of nine angled and see if it has covered 90 degreesZM4590135180225 270315 360529.74517.74506.74495.74484.74473.74462.74451.74440.74
As seen in the table above, we see that ZM has moved 270 degrees which is a multiple of 90. Now, as we said earlier, lets see the angle covered on retracement from 457.69 to 500ZM4590135180225270315360457.69468.69479.69490.69501.69512.69523.69
One thing to observe is that 180 degrees is not covered yet and has stopped at 500. 485 is important resistance and it could not get to the 180 degrees of 501.69 yet.
I feel it will retrace 225 degrees from 500. How can we confirm that? When retracing, it touched conversion but never touched MA 10 at 438.41. So, I feel we may see a retracement up to 440 by next week.
So , we have a stock that can get down to 440 in short term and can go back above 537 in intermediate time range. How do we play that? By the way, next earnings are on November 30.
if our analysis is right, we should see ZM in the range of 440 to 550 . I would do the following
Sell to open October 20 430-440 Puts and collect the premium
Sell to open Nov 30 550-560 calls and collect the premium
When the stock goes below 485, BTO October 20 485 puts ( can use spreads if the premium is high)
When the stock reaches 440, Buy Nov 440 calls ( can use spreads if the premium is high)
One thing to note is the spreads. if you don’t use spreads, margin requirements will be higher. if you are ok with the margins, STO 550 calls and STO 440 puts.
Have a relaxed weekend!!!!