Square Looks Primed to Rally in November: Chart

Stocks are ending the week with a stumble, and nowhere is that more true than the technology sector. The Nasdaq is down more than 1.1% as of this writing, doubling the downside of the Dow Jones Industrial Average on the day.

Still, the hiked volatility in tech doesn't necessarily mean that you should steer clear as investors try and figure out what's next for the market this fall.

Fact is, some of the stocks that are correcting the hardest in today's session are also the ones that have some of the biggest upside potential in the final stretch of 2018.

Case in point: Fintech firm Square Inc. (SQ) .

Square is down nearly 5% going into Friday's session, but the long-term technical picture actually points to a "buy the dip" opportunity in shares. To figure out how to trade it, we're turning to the chart:

At a glance, you don't need to be a technical-trading expert to spot the over-arching trend in Square right now. Shares have been bouncing their way up and to the right in an extremely well-defined uptrend since the start of the year.

Simply put, over that entire stretch, every retracement to trendline support has provided a low-risk buying opportunity with a high probability of upside.

That makes November's test of support look like a buying opportunity, not a cause for concern.

Square's bullish trajectory is being confirmed by relative strength, the side indicator down at the bottom of the price chart. Relative strength has been pushing higher in an uptrend of its own all year long, signaling that Square has been systematically outperforming the rest of the broad market - and continues to do so even now.

If you're thinking about taking the Square trade here, risk management is key. After all, all trendlines do eventually break, so it's crucial to be able to react quickly if that happens here. The 200-day moving average has been acting like a decent product for support this fall, making it a logical place to park a protective stop beneath.

In other words, if Square violates its 200-day, then the uptrend is in jeopardy and it makes sense to bail on this trade.

Meanwhile, Square remains one of the tech stocks that's truly working in this market, even in spite of the elevated volatility levels we're seeing today. Buy the dips.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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