It’s been a rough go for shares of Zynga (ZNGA) since the company debuted, but there is daylight.  After bottoming out around the $2 level late last year the stock began to inch higher above the first major resistance area of the 50 day moving average for the first time since the correction again.  It held that new level of support for a few months before showing signs of significant buy interest just in the past few weeks.

On Jan 4th and Jan 28th, the stock showed healthy surges off the 50DMA with good volume, but it wasn’t until early this month after the company reported earnings (beating analyst estimates) that a sustained rally took place as the stock soared to the next resistance level of the 200 day moving average.  Buy volume soared to nearly 3x the daily average indicating strong conviction on the part of buyers.

This is where I get interested for a possible swing trade of a few weeks to a few months.  I want to see that initial surge, followed by a consolidation period with declining volume.  That’s what we’re seeing now and I think this period needs to play out for at least a few more days.  It’s possible it may need to come all the way back and retest support of the 50 day moving average (red line in chart below).

A trade entry for me is signaled if the stock returns to the 50DMA and holds and/or it breaks out of a consolidation period.  So, if it doesn’t touch the 50 again, but instead shows signs of breaking out of the consolidation (big volume & price surge intraday), then that is also a signal.  Either way ZNGA is an interesting swing trade to keep an eye one.