Square (SQ) to New Highs?

SQUARE (SQ) has skyrocketed over 500% since it’s March 2020 low.  To quote the Motley Fool, this fintech company “is disrupting the financial system with its end-to-end software suite for merchants, and its Cash App mobile wallet for consumers. In recent years, the company has benefited as online shopping and digital payments have become more popular, but Square still has plenty of room for growth.”  I agree.  Today I’m going to give my upside forecast in SQUARE (SQ).  This analysis will be based on the following assumptions:

  1. Prices must rally above 289.23 BEFORE falling below 237.91; otherwise, this analysis will need to be updated.
  2. If prices rally above 289.23 and moves back below 237.91, then this analysis will need to be updated.
  3. If prices rally above 289.23, then this analysis becomes completely void with a move back below 191.36. This is the line in the sand for this upside forecast.

Now on to the weekly chart.  After this stock bottomed out in March 2020, it saw a tremendous upwards rally that has since fizzled out into consolidation over the past 7 months.  During this sideways action, it formed a bullish ABCD pattern.  It is bullish because the retracement is less than 50%.  However, the skewing showed poor momentum with 2 bars down, 22 bars up.  I call this left-handed skewing.  In addition, before slightly breaking above the mid-February high, prices formed a double bottom pattern.  This too showed poor momentum with 5 bars down, 11 bars up.  It’s the poor momentum of these two patterns that’s causing this stock from moving higher.  But this stock is showing signs of life again since it’s mid-May low.  It’s attempting to form another bullish ABCD pattern.  We just need prices to break above 289.23 before moving back below 237.91.  If this happens, then this bullish ABCD pattern gets triggered.  Right now, the skewing is 6 bars down, 2 bars up.  If we can break above 289.23 in the next 2 weeks, then we would have positive momentum (right-handed skewing).  That could help fuel this stock to new highs.

Before moving on to the upside price forecasts, lets check some additional factors that could help or derail higher prices.

Positives:

  1. 7-month consolidation is forming a large volume profile ledge that could serve as support if it’s able to move to new highs.
  2. Prices have continued to find support inside the 34 EMA wave, doing so three times during this rally.
  3. Prices have continued to trade above the 50 WMA during this rally.

Obstacles:

  1. Divergence on RSI is a potential issue; shows weakening momentum.
  2. Non-rising OBV is another cause for concern; would like to see it break above previous highs.
  3. Broader market rally fizzles out.

Now it’s time for the forecast.  If the above conditions are met, then there’s two target areas I like for this stock.

Target Area 1: 334.93-375.02

This area contains the 100% Fib projection off the potential ABCD 3 pattern, the 261 Fib extension off the potential ABCD 3 pattern, the 461 Fib extension off an ABCD pattern formed between 2018 and 2020, and the projected height (85.79) of the consolidation pattern.  All form a nice target range that could serve as potential resistance.

Target Area 2: 417.15-442.22

This area contains the 261 Fib extension off ABCD 1, the 261 Fib extension off ABCD 2, the 361 Fib extension off the potential ABCD 3, and the 100% Fib projection off ABCD 1.  All form another nice target range that should serve as strong resistance.

Recommendation:

  1. Aggressive: attempt to front run a potential upside breakout and get long above the 267.17 high with stops below 237.91.
  2. Moderate: wait for the breakout to form and get long above the 289.23 high with stops below 237.91.
  3. Conservative: wait for the breakout to form and get long above the 289.23 high with stops below 191.36.

Follow me on twitter for further updates on this stock.

Chart_21-09-25_15-09-05

ETF Watch List

Here’s a list of the 27 ETF’s I follow on a weekly basis. The ETF is listed at the top in bold followed below by the top 15 weighted holdings in each one. If green, then it’s bullish. This means the 8 EMA, 13 EMA, 21 EMA, and 34 EMA are positively stacked (i.e. 8 over 13 over 21 over 34). If red, then it’s bearish. This means the 8 EMA, 13 EMA, 21 EMA, and 34 EMA are negatively stacked (i.e. 8 under 13 under 21 under 34). If it’s yellow, then it’s neutral. The EMAs are not stacked either positively or negatively. Finally, the ones that are it italics are trading inside the 34 EMA wave. If you are a long only trader, then it’s best to look for pullback buys when green (look for ones in italics). Avoid the neutral and bearish stocks. If you are a two way trader, then you can also look for pullback sells when red (look for ones in italics). The trend is you friend!

This upcoming week’s observations are listed below (weekly change in brackets):

  • 4 ETF’s are bullish [-5], 2 are bearish [-1], and 21 are neutral [+6]
  • The most bullish sectors are QQQ (12), XRT (10), CLOU (10), SPY (9), XHB (9)
  • The most bearish sectors are XLE (9), OIH (7), XLI (6)
  • The market has moved more towards neutral this week with upcoming FOMC meeting

ETF Watch List

Here’s a list of the 27 ETF’s I follow on a weekly basis. The ETF is listed at the top in bold followed below by the top 15 weighted holdings in each one. If green, then it’s bullish. This means the 8 EMA, 13 EMA, 21 EMA, and 34 EMA are positively stacked (i.e. 8 over 13 over 21 over 34). If red, then it’s bearish. This means the 8 EMA, 13 EMA, 21 EMA, and 34 EMA are negatively stacked (i.e. 8 under 13 under 21 under 34). If it’s yellow, then it’s neutral. The EMAs are not stacked either positively or negatively. Finally, the ones that are it italics are trading inside the 34 EMA wave. If you are a long only trader, then it’s best to look for pullback buys when green (look for ones in italics). Avoid the neutral and bearish stocks. If you are a two way trader, then you can also look for pullback sells when red (look for ones in italics). The trend is you friend!

This upcoming week’s observations are listed below (weekly change in brackets):

  • 9 ETF’s are bullish [-6], 3 are bearish [+3], and 15 are neutral [+3]
  • The most bullish sectors are QQQ (12), XRT (10), CLOU (10), SPY (9), XHB (9)
  • The most bearish sectors are XLE (9), OIH (7), XLI (6)

Nasdaq Support Zone (Revision 1)

The Nasdaq (NQ) futures contract is currently range bound between 15708.75 and 15517.75 as shown on the 120M continuation chart. If prices can fall below this range BEFORE heading above it, then there’s a potential volume profile support cluster between 15384.00 and 15263.75. This zone shows the heaviest volume traded between the low on 8/19 until now. Further supporting this zone is the potential change of polarity (old resistance becomes new support) and double top target ~ 15384, the point of control ~ 15348, and the monthly pivot @ 15323.42.  I would look to be a buyer in this volume profile zone. Aggressive entries would be the top of the range (15384.00), moderate entries would be at the POC ~ 15346.75, and conservative entries would be at the middle of the zone ~ 15323.75. This pattern fails below 15235.00. Upside targets would be to scale out in the middle of the current range bound zone ~ 15608.50, the recent high @ 15699.00, and any remaining contracts to let ride with trailing stops. There are a few different products to make this trade. You could use Nasdaq e-mini futures, Nasdaq micro futures, or QQQ call options. Just make sure to use the Nasdaq futures chart for your trigger if you buy QQQ options. The pattern fails below 15235.00, so place any stops below that level.

Example trades:

Long NQ @ 15384, stop @ 15234.75, target 1 @ 15608.50, target 2 @ 15699.00

Risk = -2985.00, target 1 = +4490.00, target 2 @ +6300.00

Long MNQ @ 15384, stop @ 15234.75, target 1 @ 15608.50, target 2 @ 15699.00

Risk = -298.50, target 1 = +449.00, target 2 @ +630.00

Chart_21-09-07_09-11-36

Nasdaq Support Zone

The Nasdaq (NQ) futures contract is currently range bound between 15699.00 and 15517.75 as shown on the 120M continuation chart. If prices can fall below this range BEFORE heading above it, then there’s a potential volume profile support cluster between 15384.00 and 15263.75. This zone shows the heaviest volume traded between the low on 8/19 until now. Further supporting this zone is the monthly pivot @ 15323.42, the potential double top target ~ 15346.75 (also the point of control), and the potential change of polarity (old resistance becomes new support). I would look to be a buyer in this volume profile zone. Aggressive entries would be the top of the range (15384.00), moderate entries would be at the POC ~ 15346.75, and conservative entries would be at the middle of the zone ~ 15323.75. This pattern fails below 15235.00. Upside targets would be to scale out in the middle of the current range bound zone ~ 15608.50, the recent high @ 15699.00, and any remaining contracts to let ride with trailing stops. There are a few different products to make this trade. You could use Nasdaq e-mini futures, Nasdaq micro futures, or QQQ call options. Just make sure to use the Nasdaq futures chart for your trigger if you buy QQQ options. The pattern fails below 15235.00, so place any stops below that level.

Example trades:

Long NQ @ 15384, stop @ 15234.75, target 1 @ 15608.50, target 2 @ 15699.00

Risk = -2985.00, target 1 = +4490.00, target 2 @ +6300.00

Long MNQ @ 15384, stop @ 15234.75, target 1 @ 15608.50, target 2 @ 15699.00

Risk = -298.50, target 1 = +449.00, target 2 @ +630.00