We reviewed the charts of Block (SQ) (formerly Square) on February 1 and wrote that "Durable bottoms can take time to develop while a tradable low needs less evidence. The decline in the price of SQ has slowed with a spinning top on the candlestick chart. This gives us a couple clues that a price low has been made. Aggressive traders who are comfortable with playing a bounce can be buyers while investors who are less agile should wait for a bottom pattern to develop."
With SQ beating earnings estimates Thursday, and rallying strongly today, another look at the charts is in order.
In this daily bar chart of SQ, below, we can see that prices made a "key reversal day" on Thursday as the broad market rebounded to the upside. This Friday morning prices have gapped higher and are a lot closer to the declining 50-day moving average line.
The On-Balance-Volume (OBV) shows a recent "uptick" and the 12-day price momentum indicator continues to show a bullish divergence as downside momentum has waned.
In this weekly Japanese candlestick chart of SQ, below, we see a potential bullish hammer formation with a small real body and a large lower shadow. Prices would still need to create a white real body this coming week for confirmation but we are off to a good start. Trading volume was heavy into the recent low and I like that.
The weekly OBV line and the MACD are still bearish.
In this daily Point and Figure chart of SQ, below, we can see that prices reached a downside price target of $97.
Bottom line strategy: Shares of SQ may or may not fill the upside gap made on the opening today. Traders looking to buy SQ should wait on a partial dip into the gap - perhaps to $105 to do some buying. Without a developed base I would consider SQ a short-term trade for now.
