A Sector Under Pressure, A Stock Finding Its Footing
Zscaler has not been spared from the broader software sell-off that swept through the market in recent months, with much of the damage attributable to disruption caused by the rise of artificial intelligence. The cybersecurity name has lagged badly, dropping roughly 32% while the broader technology sector has surged nearly 52%. That kind of relative underperformance places the stock near the bottom of its peer group, even as several other software names have begun to mount a notable recovery.
Still, there are reasons to believe the worst may be behind it. Cybersecurity is emerging as one of the more resilient pockets of software, holding strategic importance that other subsectors lack. That difference in fundamental positioning may be what fuels a renewed bid for the stock as it approaches its next earnings report.
The Technical Picture
The chart has begun to show meaningful improvement. After bottoming near $114.63, the stock has been trending upward, taking out several old resistance levels along the way. Short-term boundaries now sit at roughly $167 in support — visible as a green line on the chart — and $180 as resistance, marked by recent relative highs. The shape of the recovery looks like a breakout from an upward channel.
Moving averages corroborate the bullish setup. The fastest 5-day exponential moving average has crossed above its slower counterparts, signaling that near-term momentum has shifted. More importantly, there is a confluence forming between the 21-day EMA and the 63-day EMA in the $154 to $156 zone, which also coincides with the lower edge of the trend line. That cluster is the level to watch as a potential breakdown trigger — if the stock loses that ground, the bullish thesis weakens considerably.
The Relative Strength Index is also pointing higher, although it has slipped out of overbought territory. That cooling is not particularly worrisome ahead of an earnings event; it is common for momentum to take a breather when there is binary event risk on the horizon.
The volume profile adds another dimension to the analysis. A large volume node spans roughly $133 to $173, with the point of control — the area of heaviest trading activity — sitting near $152. The stock is currently trading near the upper end of that high-volume zone. Above the node, volume thins out considerably until around $225, where activity picks back up. That kind of low-volume gap can allow for quick directional moves if a catalyst pushes price out of the dense trading area.
Structuring a Bullish Trade
For a trader who believes the software recovery has further to run and that Zscaler can ride that wave, a bullish call spread offers a defined-risk way to express the view. One example would be a long June 18th 185/205 call vertical purchased for a $5 debit.
The math works out cleanly. With $20-wide strikes, the $500 debit paid represents the maximum loss, while the maximum profit is capped at $1,500. The break-even sits at $190, requiring roughly a 10.5% move to the upside. That is well inside the expected move for the earnings event, which is implying about a 19% range. The upper strike of the spread, at $205, aligns closely with the upper edge of that expected move — which is exactly the kind of level where a stock often loses steam after an earnings pop. Selling a call at that point helps offset the cost of the long call and defines the trade's profit zone more efficiently than an outright long-call position.
Putting It All Together
The setup blends technical recovery signals with a sensible options structure. Moving averages have turned constructive, the trend line and key EMAs converge to provide a clearly defined stop level, and the volume profile shows room overhead for the stock to travel if buyers carry it past resistance. At the same time, momentum has cooled in a way that is typical before earnings, and event risk demands respect.
The call spread approach is appropriate for this environment because it caps risk in a name where volatility is elevated and the next move depends heavily on a single catalyst. Earnings are due next Tuesday — a point worth highlighting, especially since markets are closed the prior Monday, compressing positioning windows. For traders willing to take a directional view, the chart provides a coherent story; for those who prefer to wait, the support and resistance levels offer clear markers to evaluate whether the recovery has legs after the print.