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Zscaler Inc. - (ZS) - March 19, 2024

Cloud computing and cybersecurity company Zscaler (ZS) had a very long period of relative strength between May of 2023 and February of 2024. Over that period, ZS climbed from the bottom of the red zone to the top of the green zone in the SIA NASDAQ 100 Index Report.

In recent weeks, however, Zscaler’s relative strength has eroded. Last month it fell into the yellow zone and this week it has returned to the Red Unfavored Zone for the first time since August. Since leaving the green zone, the shares are down 8.4%, while the NASDAQ Composite Index is down 0.6% over the same time frame.

Yesterday ZS finished in 56th place, down 2 spots on the day and down 51 positions in the last month. Zscaler (ZS) has peaked and come under renewed distribution in the last month. The previous uptrend peaked just short of $260.00 in February and since then, we have had a weekly doji candle which suggested bulls were losing strength and four weekly red candles, which, along with the snapping of two uptrend lines, indicated the bears had taken control of the market.

More recently, the shares have fallen and remained below $200.00 with round number support reversing polarity to become new resistance, a sign of ongoing selling pressure. Next potential downside support appears near $160.00, a previous breakout point, and then the $150.00 round number.

Last May, a major downtrend in Zscaler (ZS) bottomed out and the shares then spent the next nine months recovering lost ground, mainly through two big rallies in May-June and November-February. The shares encountered resistance just below $260.00, and since then, have come under distribution, starting a downtrend of lower highs, completing a bearish Double Bottom pattern and falling back under the $200.00 level.

Potential downside support tests appear near $181.20 based on previous column highs/lows, $167.40 based on a horizontal count, and the $150.00 round number. Initial resistance appears near $212.30 based on a 3-box reversal.

With a bearish SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 5 out of 10, ZS is exhibiting short-term weakness against the asset classes.

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