To The Moon

Hi everyone. Today I’ll be looking at another software company:

Zscaler Inc. (NASDAQ: ZS)

ZS’ chart should not be unfamiliar to any of my regular subscribers. It is in a long-term consolidation pattern with lower highs, but higher lows. The most interesting development on ZS in recent times is the bullish divergence on the weekly chart. The higher the timeframe of the divergence, the more likely it plays out.

ZS is trading in a descending channel on the daily chart, in what appears to be a handle of a cup and handle pattern (Hint: if you look closely at the price action since the 2021 top, you can see a deep cup forming). There were 2 notable developments on the daily chart, namely:

1. A retest of the 157.03 level which was strong support in 2021. This level was the “spark” that led to the move towards ATHs at 376.

2. Bullish divergence on the daily chart that formed on the retest of the aforementioned 157.03 level.

The likelihood of a handle breakout is now more likely than a rejection and an extended consolidation phase, and I’m expecting a move back towards overbought levels (i.e. momentum-style move).

A breakout of the handle will likely see a move back towards the purple resistance trendline, with 227.30 being a likely target (bearish gap resistance). The key level to watch for a breakout would be 185.99, which was a sticky level back in 2022. however, if ZS rejects this level, it could go back into 172 and lower. Moreover, if ZS loses 157.03, however, then it will likely fill the gap at 136.66-140.67.

In spite of the favourable technical setup, the possibility of a rejection, or at least some consolidation in the short term, is there. Consequently, I am initiating coverage on ZS with a HOLD sentiment.

Sentiment: HOLD (New)

Summary (with Price Targets - NFA):

• Longer-term consolidation pattern with lower highs but higher lows, with a short-term cup and handle pattern with ZS currently consolidating in its handle pattern

• Handle breakout above 185.99 will lead to a move towards 227.30 while a rejection at the handle resistance trendline will see a move towards 172 and lower, with room towards the unfilled bullish gap at 136.66-140.67

All right, that’s all for this newsletter. Till next time!

$Zscaler Inc.(ZS)$ $MongoDB Inc.(MDB)$ $Dell Technologies Inc.(DELL)$ $Snowflake(SNOW)$ $Apple(AAPL)$

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