Will the stock start performing better when the company reports on Thursday after the close of trading?
Much like we’ve seen with Roku (ROKU) - Get Report - which also reports earnings on Thursday and which we rpreviewed - Square stock has not performed very well lately due to selling pressure in high-growth stocks.
That’s even as the company reported solid earnings in February, just like Roku did.
Of course, Square has the added bonus of bitcoin and other cryptocurrencies helping to generate growth. That said, it’s recently seen PayPal (PYPL) - Get Report enter the space and Coinbase (COIN) go public.
Will earnings exacerbate the recent declines or will the quarterly report help Square resume its upside move?
Keep in mind that PayPal reports on Wednesday after the close, which could have an impact on Square stock ahead of its report.
Shares are struggling with the 50-day and 21-week moving averages. However, it continues to hold up over the $225 to $228 area.
On a bullish post-earnings reaction, I’d love to see a close above the $251 mark. That would put Square above a number of key measures, as well as above all of its meaningful daily and weekly moving averages.
A troubling reaction would be a gap-up move toward $250 that fades throughout the day, leaving Square off the session highs and below these key measures.
Above $251 opens the door toward $275. From there, we can reassess the stock’s potential trajectory.
On the downside, a break of $224 is concerning for obvious reasons. Not only does it put Square below recent support, but also gives us a monthly-down rotation below the April low.
That has the potential to set us up for a test of the $200 area and the 200-day moving average.
That seems a bit extreme, requiring a decline of about 12% to 15%. However, the move doesn’t have to come all at once. Square could work its way down there over the course of several days or even several weeks.
After all, it was in this area about a month ago. Should Square find itself there again, bulls will likely take a stab at it on the long side.