Reading the Price Action in Square

• Posted by Greg Harmon
• on November 3rd, 2016

I don’t know about you, but these Square readers and Square registers are popping up everywhere in my life. I even have one that I take on the road and to meetings. So it probably should not come as a surprise that the stock has started to move higher after reporting earnings after the close of the market Tuesday. The question now is just how far can it go?

The chart below may be able to give some guidance in that question. It shows the price action in the stock since it went public almost a year ago. The part to focus on is from May onward. The price fell hard following its earnings report in May. And it languished there until mid July when it started higher. That move up found resistance in mid August and the price action morphed into consolidation. It had built a descending triangle into the earnings report.

But that triangle can also be viewed as the Handle to a Cup and Handle pattern. The move to the upside that started yesterday triggers the pattern and establishes a target to about 15.60. That is roughly the all-time high and where it failed 3 times from late March to April. Momentum supports such a move as the RSI is in the bullish zone now and rising. The MACD is also crossed up and rising. Finally, the Bollinger Bands® are opening to the upside. Everything has aligned for this stock and it is time to make a payment on some shares.

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