Key Takeaways
- Shares in Zscaler plunged in extended trading Tuesday after the provider of cloud-based cybersecurity services issued earnings guidance that came in significantly below analysts’ expectations.
- Two rallies in the stock up to the 200-day MA in July and August have been met with considerable resistance, indicating underlying selling pressure.
- Amid earnings-driven weakness, investors should monitor key chart levels at $164, $143, and $135.
Shares in Zscaler (ZS) plunged in extended trading Tuesday after the provider of cloud-based cybersecurity services issued current quarter and full-year earnings guidance that came in significantly below Wall Street expectations, as enterprise customers manage technology budgets and spending more carefully against a backdrop of economic uncertainty.
Below, we use technical analysis to navigate the Zscaler chart and identify key price levels investors should watch out for amid the stock’s projected earnings-driven drop.
200-Day Moving Average Providing Resistance
Since the 50-day moving average (MA) crossed below the 200-day MA in early May to form an ominous death cross, Zscaler shares have traded mostly sideways.
More recently, two rallies up to the 200-day MA in July and August have been met with considerable resistance, indicating underlying selling pressure in the stock.
The stock fell 15.1% to $164.10 in after-hours trading on Tuesday, after falling 3.4% during regular trading amid a broad market selloff.
Key Levels to Watch Amid Post-Earnings Selling
Amid price weakness, investors should keep an eye out for three chart levels where Zscaler shares may attract buying interest.
The first level to watch sits at $164, a location where the shares will likely encounter support near a trendline that connects three prominent swing highs that formed between June and September last year with trading activity situated around this year’s May and August troughs.
Further selling could see the shares fall to the $143 level, where investors may seek entry points near the February 2023 peak and a range of comparable price action from June to August last year.
Finally, a steeper downturn may lead to the shares revisiting lower support around $135. This area on the chart could attract buying interest near a horizontal line that links a range of similar trading levels between October 2022 and August last year.
Interestingly, this area also roughly aligns with a bars pattern price target that extracts the stock’s sharp down-trending move from February to April and positions it from last month’s high. It’s worth pointing out that a 14% drop occurred near the start of that prior decline, similar in magnitude to Wednesday’s expected earnings-fueled drop.
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As of the date this article was written, the author does not own any of the above securities.