Zscaler Stock Drops 4.09% Amid Technical Breakdown Signals

Zscaler (ZS) declined 4.09% to close at $292.75 in the latest session, marking a three-day losing streak with a cumulative loss of 4.82%. This sell-off signals potential near-term vulnerability and warrants a multi-indicator technical assessment.
Candlestick Theory
Recent sessions reveal emerging bearish momentum. The October 7 candle formed a long-bodied bearish marubozu (open $305.50, close $292.75), indicating strong selling pressure and rejection near the $305 resistance. This level now solidifies as near-term resistance, aligning with the October 3 high of $305.50. Critical support lies at the September 26 low of $285.70, which held during the late-September consolidation. A breach below this level could trigger accelerated selling.
Moving Average Theory
Price recently crossed below the 50-day moving average (~$297), suggesting weakening short-term momentum. However, it maintains position above the 100-day (~$281) and 200-day (~$258) MAs, preserving the longer-term uptrend. The 50/100-day MA convergence hints at potential consolidation, while the widening gap between the 100-day and 200-day MAs underscores persistent bullish structure. A sustained break below the 100-day MA would signal material trend deterioration.
MACD & KDJ Indicators
The MACD histogram has shifted negative, reflecting bearish momentum acceleration after a bearish crossover signal. KDJ lines (K: ~25, D: ~32, J: ~18) are approaching oversold territory, though J-line compression suggests downward pressure persists. While KDJ’s proximity to oversold levels may support a short-term bounce, MACD’s negative divergence reinforces bearish near-term bias. This divergence between oversold KDJ and decisively bearish MACD warrants caution.
Bollinger Bands
Price pierced the lower Bollinger Band ($294) on October 7, coinciding with elevated volatility (band expansion). Historically, such events preceded mean-reversion bounces (e.g., September 30 rebound). However, the close below the lower band coupled with expanding volatility suggests potential continuation of the downtrend. A confirmed close back inside the bands is needed to signal stabilization.
Volume-Price Relationship
Recent distribution days exhibit concerning volume patterns. The October 7 sell-off occurred on 1.78 million shares—81% above the 30-day average volume—confirming strong bearish conviction. Prior advances (e.g., October 1 rally) saw only moderate volume, indicating weak buying interest. This negative volume divergence reinforces the vulnerability signaled by price action.
Relative Strength Index (RSI)
The 14-day RSI at 38 resides in neutral territory but displays a steep downtrend from mid-September’s overbought peak (RSI 73). While not yet oversold (sub-30), its rapid descent underscores building downward momentum. Historical reactions near RSI 35 (bounces in late August and September) suggest this level may offer temporary support, though its warning signal remains secondary to volume and candlestick confirmation.
Fibonacci Retracement
Applying Fibonacci to the July high ($316.50) and September low ($285.70): the 61.8% retracement ($292.60) aligns precisely with the October 7 close ($292.75), creating a technical inflection point. A decisive close below this level targets the 78.6% retracement ($288.20) and September low. Confluence with Bollinger’s lower band enhances $292.60’s significance, while recovery above $297 (38.2% retracement) would relieve bearish pressure.
Confluence and Divergence
Convergence of bearish signals—break below 50-day MA, volume-confirmed candlestick breakdown, MACD downturn, and Bollinger Band breach—strengthens the near-term bearish thesis. Notable divergence exists between oversold KDJ readings and other momentum indicators, suggesting potential for a technical bounce near $288–$292 support. However, volume dynamics and MACD’s bearish trajectory indicate rallies toward $300–$305 resistance may face distribution. Traders should prioritize breach confirmation at key Fibonacci and moving average levels for trend validation.