ZM owners better look out below

Free After-Hours Analysis: 

I wrote about ZM last week when the stock tumbled 15% after announcing 367% revenue growth last quarter. As well as the company is doing, investors were hoping for even more.

Last week’s post-earnings selling stalled just above $400 support. Unfortunately, that resilience only delayed the inevitable and today the stock finally retreated under $400. But this latest violation shouldn’t surprise anyone. As I wrote last week:

There are few things more worrying than a stock that falls on good news. That signals unrealistic expectations and once the selling starts, it usually doesn’t stop. The market loves symmetry and rallies that go too high are almost always followed by pullbacks that go too low.

While nothing is ever certain in the stock market, this chart looks as bad as it gets. Fall under November’s lows and we could see another wave of defensive selling push this stock back to $300 or even lower. As bad as a 35% retreat from all-time highs feels, this still has room to get a lot worse.

This stock is giving us a great short entry under $400 with a stop just above this level. But who knows, maybe this thing turns around and bounces back. It’s possible and it happens occasionally. But if ZM is going to return to the highs, the first thing it needs to do is retake $400. Until that happens, this stock is untouchable.

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