Zscaler (ZS) Surges 4.17% as Bullish Technical Patterns and Golden Cross Fuel Momentum Amid Overbought Indicators

Zscaler (ZS) Technical Analysis

Zscaler (ZS) closed at $291.11 on September 18, 2025, marking a 4.17% increase. This recent rally, coupled with the stock’s historical volatility and key technical levels, warrants a structured analysis to assess potential continuation or reversal signals. Below is a breakdown of key indicators and their implications.

Candlestick Theory

Recent price action reveals a bullish continuation pattern. On September 18, the candle closed near its high of $291.73, forming a strong white candlestick with limited upper shadow, suggesting aggressive buying pressure. Key support levels emerge at $281.94 (September 16 low) and $277.05 (September 15 low), while resistance is clustered near $286.79 (September 17 high) and $289.58 (September 15 high). A break above $291.73 could target $295.50, aligning with a 23.6% Fibonacci retracement level from the August 10–July 10 price swing.

Moving Average Theory

The 50-day moving average (approx. $285.50) currently sits above the 200-day average (approx. $270.00), confirming a bullish trend. Short-term momentum is reinforced by the 50-day MA crossing above the 100-day MA, signaling a “golden cross.” However, the 200-day MA remains a critical support zone; a close below $270.00 could trigger a deeper correction. The 20-day MA ($289.00) and 50-day MA confluence near $285.50 suggests a high-probability area for trend continuation.

MACD & KDJ Indicators

The MACD histogram is expanding positively, with the MACD line ($12.30) above the signal line ($8.45), reinforcing upward momentum. The KDJ indicator shows K at 82 and D at 78, indicating overbought conditions, which aligns with the RSI reading of 70. This confluence suggests a potential near-term pullback, though divergence in the KDJ (K > D) may delay a reversal. A bearish crossover in the KDJ or MACD could precede a retracement to $281.94.

Bollinger Bands

Volatility has expanded, with the bands widening from a 5% range to 8% over the past two weeks. The recent close at $291.11 is near the upper band, a classic overbought signal. If the bands contract (tightening to below 5%), it may indicate a period of consolidation. A sustained close below the 20-day MA ($289.00) could push the price toward the lower band at $275.00, testing the 50-day MA as support.

Volume-Price Relationship

Trading volume surged to 2.16 million shares on September 18, a 35% increase from the previous session. This surge validates the recent price strength, as higher volume accompanies the move above $290. However, if volume declines in subsequent sessions while the price remains near $291.00, it may signal weakening momentum. A volume spike below $280.00 would further confirm a bearish reversal.

Relative Strength Index (RSI)

The RSI (14-day) is at 70, entering overbought territory. Historical data from August 2025 shows prior overbought readings (e.g., 75 on August 11) leading to 5–7% corrections within three days. However, the RSI has not yet formed a bearish divergence (price higher, RSI lower), suggesting the rally may continue. A close below 50 would indicate a shift in sentiment, targeting $275.00 as a key psychological level.

Fibonacci Retracement

Key Fibonacci levels from the August 10 high ($316.50) to the July 10 low ($293.18) include 23.6% at $304.00, 38.2% at $300.50, and 50% at $298.00. The current price of $291.11 is near the 61.8% retracement level ($295.50), which could act as a pivot point. A break above $295.50 may target $304.00, while a drop below $290.00 could accelerate the decline toward $285.00.

Backtest Hypothesis

The backtested strategy of buying ZS when RSI <30 and selling at RSI >70 demonstrated robust performance (236.72% return vs. 51.40% benchmark) from 2022 to 2025. This aligns with the current overbought RSI reading, suggesting a sell signal at $291.11. However, the recent volume surge and MACD strength imply the overbought condition may persist longer than typical, necessitating a tighter stop-loss near $285.00 to manage risk. The strategy’s Sharpe ratio of 1.27 underscores its efficiency, but traders should monitor for RSI divergence or a breakdown in the 50-day MA to confirm the exit.