Shares of Block (SQ) -- formerly Square -- were downgraded to "Sell" by sell-side firm Evercore this week. The price target was also cut to $55 from $120 -- ouch -- and this would represent a new 52-week low if reached. Let's put aside the rose colored glasses and check out the charts and indicators.
In this daily bar chart of SQ, below, we can see that prices have suffered through a long and painful decline the past 12 months. A low can be seen in June but the subsequent rally into early August did not last long nor go far. Prices are back below the 50-day moving average line. The declining 200-day line was never challenged. The daily On-Balance-Volume (OBV) line made a new low in early September telling us that sellers remain more aggressive than buyers. The trend-following Moving Average Convergence Divergence (MACD) oscillator is bearish.
In this weekly Japanese candlestick chart of SQ, below, we see a less than bullish picture. I fail to see a bullish reversal pattern here. Prices are in a longer-term downtrend as prices trade below the bearish 40-week moving average line. The weekly OBV line held in June and July, but the line looks pointed lower again. The MACD oscillator is below the zero-line.
In this daily Point and Figure chart of SQ, below, we can see a potential upside price target in the $100 area. A trade at $77 is needed to refresh the uptrend.
In this weekly Point and Figure chart of SQ, below, we can see a potential downside price target in the $35 area.
Bottom line strategy: I have to agree with the view of this sell-side fundamental analyst -- SQ looks like a sell and prices could go lower in the weeks ahead.
