Shares of PayPal (PYPL) - Get Report have been moving lower since the company reported a second-quarter earnings beat last Thursday. Competitor in the mobile payments space, Square (SQ) - Get Report is also lower since the PayPal report, and it is scheduled to report its second-quarter earnings after the bell Wednesday. The two stocks have had tremendous runs over the past 52 weeks, with Square up more than 160%, more than doubling performance of PayPal in that time. But based on the reaction of PayPal's stock price to its positive report, it will probably take a blowout number to get Square back up to its all-time highs.
In Wednesday morning trading, the stock was down 2.3% at 26.20, but it was climbing moments ago.
The daily chart of Square shows the stock making a steady series of higher highs and higher lows with 35-day cycle lines marking inflection points along the way. It is currently at another cycle point. Last Thursday's large reversal candle engulfed the entire range of the previous 10 sessions and is similar to the one that formed in early June at the last cycle high.
Since that time, the relative strength index and moving average convergence/divergence have been moving in bearish divergence to price, reflecting an underlying weakness in price momentum. Chaikin money flow is still well into positive territory but the Chaikin oscillator, which measures the difference between the 3-day and 10-day exponential moving averages of the accumulation/distribution line, has been moving lower and is under its signal average.
Another earnings beat could see the stock continue on trend and make a new all-time high, but the cycle time line and technical indicators suggest that, as in the case of PayPal, strength should be sold.
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The author is an independent contributor and at the time of publication had no position in the stocks mentioned.