It has been anything but hip to be a Square (NYSE:SQ) investor of late. But longer-term growth prospects and a supportive price chart mean it’s time to buy SQ stock today at a favorable risk-adjusted price before other investors inevitably change their tune. Let me explain.
Tuesday aside, the broader market has quickly become a more difficult environment for bulls to buy stocks in with confidence. Elevated trade-war risks are basically holding Wall Street hostage. But SQ stock had already been marching to the beat of its own bearish drummer, with shares shedding 25% since late February.
The good news for Square stock? It’s our contention the dismissive price action is offering today’s investors a solid opportunity to buy growth at a discount off and on the price chart.
SQ Stock Weekly Chart
About two weeks ago, Square’s mixed quarterly confessional got the better of investors. Reduced, below-views guidance for the current quarter and a modest miss in gross payment volume sent shares sinking to fresh relative lows.
The dismissed upshot of the earnings report is SQ stock also delivered yet another strong top- and bottom-line beat. The company also raised its full-year outlook modestly above Street midpoint forecasts and continued to show overall solid-looking growth topped by the company’s “outperformance in Cash App as well as continued strength across our seller business.”
As of Tuesday’s close — and nearly two weeks after SQ stock’s initial fallout and the continuation of the downtrend — Wall Street’s near-term anxieties have put shares into a solid-looking technical spot for buying growth at a discount.
Specifically, we can see SQ stock’s 25% correction on the weekly chart is also testing the 62% retracement level tied to late December’s ubiquitous bottom. The price action in Square has also put shares into the lower and pinching Bollinger Band. Lastly, stochastics is also oversold. The net result of Square’s weekly chart are shares appear to be offering investors a technically well-supported purchase to go long the name.
SQ Stock Buying Strategy
The suggestion for buying SQ stock is to allow the trading week to complete and look to go long as the shares confirm a weekly candlestick low. As of Tuesday’s close (and if prices were to remain confined to the two-day range and finish in this area), the candle would look like today’s weekly doji. Investors would then only purchase Square if shares moved through $65.24.
Initially, I’d recommend simply setting a stop-loss below the weekly pattern low. On the upside, using a 2:1 ratio to peel off one-third of the SQ stock position is how I’d reduce exposure while taking profits.
The objective of this type of entry is an attempt to avoid buying SQ stock during a potential two-to-three-day dead-cat bounce in the broader market and getting suckered in long during a temporary rally. More importantly, Square’s weekly chart has done a good job of marching to the beat of its own bearish drummer. We’re confident it is readying to change its tune for the better.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. . For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.