Shares of mobile payment company Square (NYSE:SQ) are higher by roughly 40% year-to-date. While SQ stock is just now getting back to its February highs, it has, in the meantime, developed further technically sound and bullish patterns. Active traders and investors could look for this stock to continue pushing higher.
As always, when looking at a single stock trading idea it is important to be aware of any known catalyst, such as earnings reports. Square is scheduled to report its next batch of earnings on Aug. 1, i.e., in about three weeks from today. From a tactical perspective, this means that any trading positions in this name should be closed at least a couple of days before the earnings report so as to avoid the “gamble trade” through earnings. One can always re-enter a position once earnings are out of the way.
For some broader market context, it is noteworthy that despite plenty of reasons for stocks to selloff somewhat at this juncture, we are seeing more bullish patterns being traced out, such as the one on SQ stock. Generally speaking, the more similar patterns that develop in any given asset class or sector, be that technical, fundamental or structural, the better the odds of prices moving in said direction.
SQ Stock Charts
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Sliding over to the charts, we’ll start with the multi-year look. Here we see that Square Inc stock, since its October 2018 all-time highs, has developed the wedge pattern that I marked with the two green lines. Over the past few weeks this pattern has resolved to the upside and barring any major bearish news, the path of least resistance looks to be higher still, albeit not in a straight line.
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On the daily chart, we see that SQ stock since late 2018 has developed a clearly visible series of higher lows. This ultimately led to the stock in June breaking above the green diagonal resistance line and shortly thereafter also back above the red 200-day moving average. After a successful re-test of the green line, thus turning it from support into resistance, the stock pushed higher again.
Over the past few days, Square stock rallied strongly and has now arrived at horizontal resistance around the $80 mark, which the stock has struggled to get above all year long.
While SQ stock may be overbought in the intermediate term and needs to digest some recent gains before pushing past the $80 area in a more sustainable fashion, the technical backdrop looks promising for this stock to climb higher toward $90. Any strong bearish reversal that gets the stock back below $72 would be a near-term stop loss signal. In that case, one can always re-enter a long position upon the next strong bullish reversal.
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