In 2020, Zoom Video Communication (ZM) shares skyrocketed mainly because of the peculiar situation created by the COVID-19 crisis. Now that the globe is molting from the coronavirus pandemic as more vaccines get developed and released, will Zoom’s excellent performance of 2020 continue?
On January 12th, 2021, ZM stock pulled back following the announcement of a $1.5 billion stock offering. The number of Zoom downloads has also started going down, making investors wonder whether ZM’s impressive performance is about to reverse. If you are new to the stock market, the main question at the back of your mind might be, “Is Zoom trading a good idea?”
Keep reading to understand more about Zoom and its performance to make the right decision.
A Deeper Look at Zoom
To make the right decision about trading Zoom stocks, it is crucial to understand how it operates and why it has become a trader’s target.
Zoom is a relatively new company with its origin dating back to 1997 when its founder, Eric Yuan, formed WebEx Communications. After CISCO acquired WebEx, Yuan created Zoom in 2011, and its unique operation model has won affection from people across the globe. So, how exactly does Zoom Work?
It is a type of communication software designed to facilitate real-time virtual interactions between team members. When COVID-19 broke out in the first quarter of 2020 and made physical meetings almost impossible, companies and individuals saw ZOOM as a perfect solution to facilitate working from home. With over 50% of Fortune 500 companies using Zoom by the close of 2020, there is no doubt that the company has a lot of potentials.
A closer look at Zoom’s revenue over the years is a demonstration that shouts, “a giant has arrived” and is ready to shake the market. In the 2018 financial year, Zoom revenue was $121.5 million, but the figure grew exponentially to reach $622.7 million in the 2020 financial year.
Zoom’s Post COVID-19 Performance: What to Expect
Although Zoom has shot to fame riding on the coronavirus wave, it is likely to experience a slowdown in 2021 as more people go back to physical meetings. The company has already started reporting a reduction in Zoom Downloads, and meetings were also going down by the second week of January 2021.
Despite the expected slowdown, COVID-19 has changed the way people communicate and ushered in a new era of video conferencing. So, Zoom services demand is likely to slow down but will remain high as companies adopt the new norm of video conferencing.
Zoom team’s undying drive to progressively improve the brand’s product is expected to keep more companies interested in its services. Again, many of those who got satisfied with its benefits are likely to stick around, a move that is expected to maintain the high demand for Zoom even after the coronavirus pandemic.
Zoom Trading: Here are the Main Steps to Follow
Zoom presents traders with a unique opportunity to make profits as the market unfolds with its amazing potential. So, if you like trading tech 100 stocks or want to diversify your portfolio, here are the main steps to follow in Zoom trading.
- Identify a Good Broker and Open a Trading Account
To trade Zoom stocks, the first step is opening an account with your preferred broker. So, check for a broker with an easy-to-use platform, good customer support, and low transaction fee. If you are interested in other specific stocks, confirm that the broker also lists them.
As you select the preferred broker, it is important to also think of how adding Zoom stock will affect your overall portfolio. If you have been focusing on forex trading, expanding to stocks might help you reach more industries. Apart from stocks, you might also want to consider ETFs and platinum trading.
- Develop a Good Strategy
Once you have created an account with the selected broker, the next step is developing a good strategy. Although there are many strategies that you can use, it is advisable to work with the one you are most conversant with. The three most common strategies used by USA 500 stock traders are range trading, position trading, and trend trading.
a) Range Trading Strategy
Range trading strategy involves identifying areas of support and resistance to open a trading position. The strategy works very well when the market does not have significant volatility or discernible trend. To effectively trade using this strategy, you should make sure to use various technical analysis tools, such as moving average convergence divergence (MACD).
b) Trend Trading Strategy
This is another common trading strategy that works well with traders of all experience levels. Using this strategy, a trader aims to get positive returns by exploiting a stock’s directional momentum. Trend trading mainly takes place over the medium to long-term time horizon. To make trend trading more convincing, consider using multiple time frame analysis.
c) Position Trading
This is a long-term trading strategy, and fundamental factors mainly guide it. However, successful stock traders also use a few technical indicators, such as Eliot Wave Theory, to help them find trading positions. With position trading, smaller fluctuations are not factored in because they do not have a significant bearing on the stock market’s broader picture.
To trade Zoom using this strategy, you might target trend changes in weeks, months, or even years. It is crucial to understand how various economic factors impact the market and the targeted stock. For example, if the US government releases financial data that show the dollar is strengthening, what impact does such news have on the selected Tech 100 stocks?
Although Zoom is a relatively new company, its growth since inception has been impressive. While the success achieved in 2020 was largely hinged on the demand from stay-at-home policies driven by COVID-19, Zoom is working towards cementing itself as a leader in the videoconferencing niche. To trade Zoom stock, make sure to identify a good broker and reliable strategy.