Block Inc. ( SQ) has been making a bottom pattern since May. Let's check out the charts of the payment services company to see how investors are reacting to their mixed earnings report Thursday evening.
In the daily bar chart of SQ, below, I can see a number of positive developments. The shares have traded sideways from May and have crossed above and below the 50-day simple moving average line a number of times. SQ has been trading above the rising 50-day line since early January. Also SQ has rallied above the bottoming 200-day moving average line.
The trading volume does not look like it has increased but the math-driven On-Balance-Volume (OBV) line shows a rise from October. A rising OBV line tells me that buyers of SQ have been more aggressive than sellers. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line but needs watching as it has pulled back to the zero line.
In the weekly Japanese candlestick chart of SQ, below, I see an improving picture. Prices are above the bottoming 40-week moving line.
Trading volume is on the lighter side but the weekly OBV is firming and that is a plus in my book. The MACD oscillator is close to moving above the zero line for an outright buy signal.
In this daily Point and Figure chart of SQ, below, I can see a downside price target in the $66 area.
In this weekly Point and Figure chart of SQ, below, I can see a potential downside price target in the $62 area.
Bottom-line strategy: The two Point and Figure charts above currently suggest that SQ could correct down into the $66-$62 area. Another pullback could happen with weakness in the broader market averages. This weakness, should it develop, may be a buying opportunity. Risk to $55.
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Another increasing concern for equities is that we are likely to see an 'earnings recession'.
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