Forget about investing in the obvious economic reopening stocks, Jim Cramer told his Mad Money viewers Monday. That ship sailed weeks ago. Instead, Cramer said he's betting with stocks like payment processor Square Inc. (SQ) , which on Monday announced that they are starting a bank to broaden their offerings.
We looked at SQ on Feb. 22 ahead of earnings. We said then we "... would recommend raising stop protection to $245 and reducing your long exposure."
Let's check out the SQ charts again.
In the updated daily bar chart of SQ, below, we can see that the shares declined from Feb. 22 into the end of the month. Prices broke below $245 so I will assume traders were stopped out. SQ sank below $220 before bouncing in recent days. Prices are back above the rising 50-day moving average line but that may not last too long.
The On-Balance-Volume (OBV) line weakened and the Moving Average Convergence Divergence (MACD) oscillator is in a take profit sell mode.
In the weekly Japanese candlestick chart of SQ, below, we can see a top reversal pattern -- an evening star formation. Prices are still above the rising 40-week moving average line but the weekly OBV line has diverged from the price action for months. This is not a positive development.
The weekly MACD oscillator has been "rolling over" and crossed to the downside for a take profit sell signal.
The daily Point and Figure chart of SQ, below, is projecting the $155 area as a possible downside price target.
In this weekly Point and Figure chart of SQ, below, we can see a longer-term upside price target in the $450 area.
Bottom-line strategy: I will assume that traders are flat SQ. Despite the recent bounce in prices the overall chart picture suggests more weakness is possible. The long-term Point and Figure chart is very promising but we have to deal with near-term and the possibility of a deeper correction. Avoid the long side for now.