A subscriber emailed me about Square (SQ) Wednesday: "What do you think about buying Square here?"
In our last review of SQ on March 2 we wrote that "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."
In this updated daily bar chart of SQ, below, we can see that prices declined into late March and suffered another decline in May. Prices tested the rising 200-day moving average line a number of times in May but a fresh decline did not unfold. Prices have firmed in June and now trade above the 50-day and 200-day moving averages. The 50-day average line still has a negative slope.
The On-Balance-Volume (OBV) line shows a temporary decline in April and May with renewed strength in June. The Moving Average Convergence Divergence (MACD) oscillator has crossed back above the zero line for a new outright buy signal.
In this weekly Japanese candlestick chart of SQ, below, we see a number of positive clues. Prices are in an uptrend above the rising 40-week moving average line.
The weekly OBV line has turned upwards and the MACD oscillator is narrowing towards a new buy signal.
In this daily Point and Figure chart of SQ, below, we can see a potential upside price target of $285. If prices reached this level it would be an upside breakout.
In this weekly Point and Figure chart of SQ, below, an upside price target of $323 is indicated.
Bottom line strategy: Traders could approach SQ from the long side on a shallow two day dip. Risk to $219. The $285 area is our first price target followed by longer-term gains to the $323 area.
