Zoom Video Communications (ZM) is one of the few stocks that has so far been immune to the coronavirus stock market crash. While the Dow Jones index has fallen as much as 33% off its February high, Zoom stock has found support at its recent buy point, with its relative strength line soaring into new-high ground.
XThe coronavirus pandemic has brought new terms — like "social distancing" — into our lexicon. It's also generated more demand for Silicon Valley-based Zoom.
The provider of online meeting and collaboration tools is certainly benefiting from a growing move to have employees work from home. Even before the coronavirus crisis hit, demand for Zoom stock was strong and seems likely to continue after the crisis.
Zoom Video Communications has delivered impressive EPS growth ranging from 275% to 800% over the last three quarters, albeit from low single-digit EPS. Quarterly revenue gains have come in between 78% and 182% across the last eight reports.
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To Navigate Coronavirus Crash, Watch RS Line
If you're looking for clues on how to handle the coronavirus stock market correction, keep a close eye on the relative strength line.
This telltale line compares the performance of an individual stock to that of the general market. In this case, a rising RS line means Zoom stock is outperforming the S&P 500, which serves as a benchmark for the overall stock market.
The RS line for Zoom stock has been zooming higher, a clear indication that it's sharply outpacing the S&P 500 as the coronavirus pandemic infects Wall Street.
Compare the RS line for Zoom stock to that of other stocks to watch, like Amazon (AMZN), Apple (AAPL), Microsoft (MSFT), and Alibaba (BABA). While the relative strength lines for those stocks have generally been rising, the trajectory is not nearly as sharp as that for Zoom.
So while it's risky to buy any stock during a stock market correction, especially one as severe as the coronavirus stock market crash, keep Zoom stock on your watchlist. It could be poised to pop once the we get through the current crisis.
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During a market downturn, protecting your portfolio is job No. 1. But we'll eventually have a follow-through day that launches a new bull market.
Stock market history shows that this typically happens when the news is frightening and depressing. But just as the night sky is darkest just before the dawn, the strongest bull markets tend to begin when the headlines are at their gloomiest.
A rising RS line for Zoom stock indicates light at the end of the tunnel. So stay engaged and keep an eye on how the coronavirus stock market plays out. And continue to monitor stocks like Zoom, Amazon, Apple, Microsoft, and Alibaba that are showing resilience.
On Thurdsday, Zoom stock lived up to its name and bolted higher despite the volatile coronavirus stock market. The stock rose nearly 7% in volume almost double its daily average. Zoom ended the session at the top of its price range.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
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