It’s Hip to be Square

July 10, 2019 Off By Chuck

For those that don’t know, Square (SQ) allows merchants to accept mobile credit card payments via a dongle that can be inserted into the port of a phone. When they entered into the payments space, square had the potential to be a disruptor type of business, supplanting Visa and MC as the go to platform for mobile payments. They continue to be a leader and a reason to own the stock.

I like this company and the current leadership position it holds. As such, it is worthy of investment capital, but at the right price and place. As you can see in the chart below, after peaking in September of last year, its price has bounced around and really done nothing other than consolidate sideways awaiting institutional buyers (or sellers) to take the reins and determine its next move. If you have been waiting for an opportunity to enter this stock, yesterday everything you want to see as a buyer (or share owner) happened. Price broke out of a short term (3-month) base making a new, higher high. It did this on significant volume (more than 4x normal) letting us know some bigger players are stepping forth. The fact it is breaking out from a symmetrical, well formed reversal pattern seals the deal.

The upside target for the inverse head and shoulders reversal pattern is up at T1, some ~25% above its breakout point. If the market cooperates and continues to push higher for the balance of the year, it would not surprise me this goes well beyond T1 and on to make new, all-time highs. Like all investments, it comes with risk and having an exit strategy is critical. Clearly, a break back down below the blue horizontal neckline and down to the pattern’s right shoulder would invalidate the pattern and let me know my analysis was wrong (and time to exit).

While its hip to be square, it’s even hipper to be healthy. Get well Huey! May we have the chance to hear you sing again