Why Square Inc Stock Is Ready to Break Out

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Eyes up, momentum lovers. Square Inc (NYSE:SQ), one of the hottest stocks of the year, is starting percolate once more. Indeed, signs of a bottom are multiplying, and bullish price action is returning. An SQ stock breakout is nigh at hand.

The late-November freefall really took the wind out of Square’s sails. All told, shares of the San Francisco-based mobile payments company retreated 28%. Losing almost one-third of your value in six trading sessions is enough bloodletting to scare away all but the meatiest of bulls.

Fortunately, buyers stepped up to defend the rising 50-day moving average preventing the downdraft from morphing into a trend killing swoon. For now, the overall uptrend in SQ remains intact.

Since the successful moving average test, SQ shares have rebounded slightly. Perhaps the best sign is that distribution days have all but dried up. Nothing invites nervous buyers to play like keeping all the big sellers away. Today the bulls’ return is on full display what with the stock up as much as 3% and all.


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Source: OptionsAnalytix

The bright side of the recent consolidation in the stock — what I would call its bottoming attempt — is we now have a clear line of resistance to trade around.

Watch for a breakout over $39.80 in the coming days. A pop above that will signal the stock is ready to climb once more.

Square Up and Sell SQ puts

Even though the stock has settled down over the past week, the implied volatility is still juiced. With an IV Rank of 53%, option selling strategies are still paying handsomely. And that has me eyeing a naked put play.

If you’re willing to bet SQ sits above $35 at January expiration, then sell the Jan $35 puts for 70 cents. The max reward is limited to the initial premium and will be captured if the puts expire out-of-the-money.

If the bottoming attempt fails and the stock plunges anew, then you will be obligated to buy shares at $34.30 which may not be a bad price for a longer-term stock play.

As of this writing, Tyler Craig held short puts in SQ. Want more education on how to trade? Check out his trading blog, Tales of a Technician.

For a free trial to the best trading community on the planet and Tyler’s current home, click here!


Article printed from InvestorPlace Media, https://investorplace.com/2017/12/why-square-inc-stock-is-ready-to-break-out/.

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