“By the time a participant figures out why the market has adopted a particular thesis, it may be too late… it is better to anticipate the fluctuations by studying market patterns. This is what technical analysts do.” – George Soros
The so-called Stay At Home Stocks got crushed on Monday as the markets celebrated a vaccine for Covid.
ZM was already breaking down showing signs of distribution prior to yesterday’s vaccine announcement.
Did the market sniff out yesterday’s announcement before the fact?
I’m not a conspiracy theorist, but I also don’t believe in coincidence.
As the poster child for the At Home Trade, ZM spearheaded the plunge.
I’m going to show you how I put the pieces together to identify a classic short setup in front of Monday’s air-pocket.
Following is a daily ZM from August showing the ramp from 230 to its 589 October 19 all-time high.
The first thing to notice is that ZM left a Gilligan sell signal on October 19.
A Gilligan is a gap up to a new 60 day high with a close at/near session lows.
This a strategy I created over 20 years ago in my Hit & Run books that does a good job of identifying exhaustion after Climax Runs. ZM had exploded from 230 to 589 in just weeks at the October 19 reversal.
Not all Gilligans are created equal.
ZM’s October 19 reversal warranted attention because it was also a Time/Price square-out.
My Square of 9 Wheel below shows that 589 aligns with/vibrates off March 23.
Notably, ZM bottomed on March 23.
Red is 589
Blue is March 23
Master trader W.D. Gann wrote that when time and price square-out, expect a change in trend.
Said another way, time points to price, price points to time.
When the square-out or balance out, a change in trend often occurs.
Using the 230 August 11 low as an anchor shows that 229 “points to” October 19, the date of the high.
229 is green
Purple is October 19
Technically, ZM’s Climax run shows 3 drives to a high connected by a rising trendline.
A sign of weakness off the all-time high is that ZM failed to get traction the first time down to its 20 day moving average.
A test of a rising 20 day moving average is what I refer to as a Holy Grail.
This is because it is a proven buy point.
However on October 29, just 8 trading days after its all time high, ZM faltered at its 20 day m.a., failing to respond to its Holy Grail setup.
The “Grail Fail” perpetuated an immediate drop to the 50 day line where a backtest of the now DECLINING 20 day moving average was on the table for a Holy Grail sell setup.
ZM didn’t give much time to act.
It left a momentous Breakaway Gap below its 50 day moving average on Monday.
The following Square of 9 Shows that 4396 is a full 360 degree price cycle down from the 589 all-time high.
The next 360 degrees down is 411.
ZM opened at 434 on Monday and struck 402 within minutes.
Breakage below 411 again, especially on a closing basis, opens the door to the next 360 degree decrement lower, which is 334.
Notice on the above daily ZM that the bottom of the dominating trend channel is currently around 434.
This also ties to a massive open gap from September 1.
We’ll be looking to pinpoint a short entry for subscribers for a presumed leg lower to the low 300 region.
In sum, they say the market is random. I hope the above walkthrough in ZM shows you that there are a variety of tools that you can use to make speculation a profitable profession.
