The stock market is driven by emotion and psychology, which create patterns on charts. Over the past few days, shares of Zscaler, Inc. (ZS) have experienced a significant decline, dropping over 20%. However, this dip has caught the attention of market analysts as it presents a potential buying opportunity.
The sell-off has seemingly paused, finding support around the $156.50 level. This is a significant point, as it coincides with previous support levels tested in late May and early August. This is not mere coincidence but a manifestation of investor psychology at play.
When a stock finds support at a particular price level, it indicates that buyers are willing to step in and purchase shares at that price. This is often due to past experience, where the price bounced back from that level. In Zscaler’s case, those who sold their shares near the $156.50 mark may now regret their decision, especially if they witnessed the price rebound shortly after. These remorseful sellers are likely to buy their shares back, aiming to re-enter at the same price they sold. This influx of buy orders creates a powerful force, reinforcing the support level and driving the price higher.
Furthermore, the past two times Zscaler dropped to this support level, a rally followed. This phenomenon is another common occurrence in the market. When stocks rebound from support, it often signals that buyers are concerned about missing out on the potential upside. They believe that other buyers are willing to pay higher prices, fueling a bidding war and pushing the price up.
With Zscaler potentially poised to test this support level again, it’s worth considering the implications for investors. The confluence of technical analysis, investor psychology, and historical patterns suggests a possible rebound, offering an intriguing opportunity for those looking to capitalize on this potential upswing.
