Square (SQ) has been a wild mover over the past two days, and was down about 6% on Wednesday.
Knocking the stock down were earnings, despite the company topping bottom-line expectations.
In the fourth quarter, Square bought $50 million worth of bitcoin, but more than doubled down on that recent investment in the fiscal first quarter, adding $170 million worth of bitcoin in the quarter. Microstrategy (MSTR) recently bought more too.
While a week ago that may have triggered a rally, perhaps some of Square’s exposure to the cryptocurrency - even if it is just 5% of its total cash - is having a negative impact on the stock.
Although bitcoin is up 2.25% on Wednesday, it’s down more than 14% from its high just three days ago. At its low Tuesday, the cryptocurrency was down more than 23%.
Also not helping Square? The fact that just a few days ago it too was at new highs and sporting one-year gains of more than 200%. Not to mention how far it’s come from the March low.
That may be creating some profit-taking after earnings. Let’s look at the chart to get an idea of whether this recent dip is a buying opportunity.
There’s no other way to put it: Square has been an absolute monster on the long side over the past few quarters. Most recently, shares bottomed near $200 in late January, before rocketing up over $280 a few weeks later.
The stock is working on its third straight daily decline, with shares down 15% from the highs. At Wednesday’s low, Square was down 18.5%.
From here though, we have a solid setup.
On the long side, I’m looking for some sort of rotation higher, preferably over the key $243 level and the post-earnings high of $246. That will also put Square above the 21-day moving average.
Above $250 and the 10-day moving average puts $275 and the 161.8% extension in play, followed by the highs near $283.
On the downside, the 50-day moving average has been support in consecutive sessions. A break of this mark along with the recent low and the 61.8% retracement has to have investors looking lower.
Specifically, I’d be looking to buy the dip at the 100-day moving average and perhaps a little early at the 20- or 21-week moving average. Below this zone and the $200 level will back in play.