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Square Stock: Where It Needs to Find Support After Earnings Dip

Square stock has been struggling and its post-earnings dip isn't helping matters. Here is the must-hold level for the stock now.

Square  (SQ) - Get Free Report shares are under pressure Friday after the payment-tech company reported earnings.

The shares fell as much as 5.5% in Thursday’s after-hours trading session and at last check were down 3.8%.

In-line earnings results and a miss on revenue expectations -- despite 27% year-over-year sales growth -- has the shares lower.

Investors, however, should consider other factors, like the price of bitcoin given that Square holds a stake. There’s also bitcoin-generated revenue in the San Francisco company’s Cash App, which skews the company’s overall growth.

Given how growth stocks are trading at the moment — and the trouble that PayPal  (PYPL) - Get Free Report stock is having on the charts despite dropping its pursuit of Pinterest  (PINS) - Get Free Report — it’s no surprise to see Square stock lower on earnings.

The question now is: Will support hold on the dip or is more pain on the way?

Trading Square Stock

Weekly chart of Square stock.

Weekly chart of Square stock.

Above is a weekly chart of Square stock. While we saw a painful fade from last week’s high, the stock was finally back above the 10-week and 21-week moving averages, as well as downtrend resistance (blue line).

Ahead of the report, the stock had dipped below all those measures, but not so far below them that they couldn’t be reclaimed with a bullish post-earnings reaction.

That's not the scenario that's developing thus far.

Instead, the shares are indicating an open near the 50-week and 10-month moving averages.

Not only were these measures critical support during the bear market in growth stocks (which ended in May), but they were also key support in October.

Now being tested for the second time in as many months, bulls are likely anxious to see if this key zone again buoys the stock.

If it does, I’d love to see Square stock close above $243.50, putting it back above Thursday’s low and the 200-day moving average

An eventual rebound back above $253 would put the shares above the 10-day, 21-day and 50-day moving averages.

Should Square lose the $235 level on the downside, it will put it below its two key moving averages.

That opens up the October low near $223, potentially followed by the $200 level. The latter has been a significant level for more than a year now.

For now, though, it all boils down to the 10-month and 50-week moving averages.

If they are support, see which levels Square can reclaim on the upside. If they fail as support, the October low is on the table.