/A%20concept%20image%20showing%20binary%20code%20with%20the%20ERROR%20message_%20Image%20by%20Danich%20Marmai%20via%20Shutterstock_.jpg)
With a government shutdown seemingly averted, the equities market — which had been teetering amid serious macroeconomic concerns — bounced higher on Friday. Still, investors aren’t out of the woods just yet. With President Donald Trump launching another trade war, the nation faces significant uncertainty. As such, many have abandoned growth-oriented tech firms. However, cybersecurity specialist Zscaler (ZS) just might buck the trend.
On paper, Zscaler should be an unquestioned buying idea. Not too long ago, the company revealed its results for its second quarter of fiscal 2025. Specifically, it posted earnings per share of 78 cents, standing 13% above analysts’ consensus estimate. On the top line, revenue jumped 23.4% on a year-over-year basis to reach $647.9 million.
Unfortunately, Zscaler’s strong financial performance wasn’t enough to overcome bearish pressure this week, with ZS stock losing more than 3% of value over the trailing five sessions. When considering the past one-month period, ZS is down 7%. Against an ugly trade war and significant headwinds imposed against American businesses and families, many market participants simply headed for the exits.
Here’s the thing, though: cybercriminals don’t take breaks because the economy is bad. Indeed, there’s reason to believe that deliberate data breaches and other nefarious activity could rise during recessions. If so, enterprises will need greater access to advanced solutions, such as Zscaler’s zero trust security protocol.
According to information compiled by Statista, in the third quarter of 2024, almost 423 million data records were leaked in data breaches. Such incidents impact millions of people globally. They can also cripple businesses in the worst-case scenario and even in the best case, they may impart reputational harm.
These days, it’s simply not worth going without cyber protection. As such, ZS stock makes for an enticing fundamental argument.
Technical and Statistical Winds Augur Well for ZS Stock
While the core narrative of cybersecurity relevance will establish Zscaler’s credibility in the eyes of the old guard, let’s be real: the market responds to human emotions, not to financial metrics that occurred in the past. Put another way, there may be great value in getting ahead of technical formations.
One of the most cited chart patterns is the bullish pennant, which ZS stock appears to be printing. The formation contains three basic elements:
- An initial rally, known as a flagpole.
- A subsequent period of consolidation, which is either rectangular in shape (flag) or triangular (pennant).
- A third and final phase where the target security (hopefully) breaks out.
Using a self-developed screener, I had my computer spit out potential bullish pennant candidates among Nasdaq 100 stocks, with Zscaler being a particularly interesting idea. Not only does it appear to be charting a pennant, the fundamental argument is very sound. Again, cybercriminals never rest.
Another factor that makes ZS stock a tempting idea is the statistical backdrop. As a baseline, ZS commands an upward bias. Using data from January 2019, a long position held for any given eight-week period has a 62.34% chance of being profitable.
Now, under the specific parameters of modest volatility, this eight-week long position’s odds rise to almost 67%. Specifically, when ZS stock loses up to 5% in a one-week period, the red ink has a tendency of attracting buyers. Over a roughly two-month period, investors should be profitable more often than not.
Add the context of a possible bullish pennant and the case for ZS stock becomes that much more intriguing.
Using Barchart Premier to Plot an Effective Options Strategy
Over the last several months, I’ve been pounding the table on the benefits of a Barchart Premier membership. With a free subscription, readers can alert themselves to a limited range of ideas. With full access, however, investors can deploy advanced strategies with precision.
For example, based on statistical projections along with a market-realistic Monte Carlo simulation, ZS stock may rise to a price between roughly $213 to $216. With this market intelligence, Premier members can pull up available bull call spreads for the options chain expiring April 4. Once there, they can filter for spreads with the closest short strike price (in this case, $210).
Within seconds, I can see a list of trades that meet my preferred criteria. As a speculator, the 205/210 bull spread appears awfully tempting. If the pennant breaks out as hoped, ZS stock could easily exceed the $210 short strike price at expiration. And that would lead to a rich payout of over 163% — not bad for a few weeks’ worth of speculation.
