The 11/08/20 post “Zoom Update” noted that Zoom Video Communications Inc. (ZM) had broken below an important support level. The post also noted a recommendation to go long would require abundant evidence. ZM lacked enough evidence and no recommendation to buy ZM was issued.
Since 11/08/20 ZM has continued to decline, while the S&P 500 (SPX) rallied. ZM has declined more than 37% from its all-time high made just a few weeks ago – the largest drop for the stock since it’s bull move began almost one year ago.
When a stock or market behaves contrary to its normal behavior its usually a clue that a major trend change could be underway. The 37% decline increases the probability that ZM may have made a major peak in October 2020. In less than one – year ZM had rallied nearly 900%, usually stocks with manic rises such as this have subsequent dramatic declines. These drops can range from 70 to 90%. Sometime the stocks go to zero.
From 1999 to early 2000 Qualcomm Inc. (QCOM) was one of the mania stocks leading that bull market. On the first day of trading in 2000, QCOM made its final top – two weeks before the Dow Jones Industrial Average made its bull market peak. About two and a half months after QCOM’s peak the SPX and Nasdaq Composite completed their respective bull market highs.
Perhaps ZM is acting as an early waning signal for the broader US stock market, if so, maybe the SPX could make a bull market top in early 2021.
If the major US stock indices are making new highs in early 2021 unaccompanied by ZM, it could be a very bearish signal.