Square (NYSE:SQ) shares are going parabolic. It’s working on its tenth up day in a row this morning with a rousing 3.6% rally. The ascent is reminiscent of Advanced Micro Devices’ (NASDAQ:AMD) recent rip. There’s no doubt momentum traders are having a heyday in this market. Scorching runs are becoming commonplace.
Here’s my take on SQ stock.
We begin in the place where all good technical takes commence — with the trend. And, well, with SQ it’s a beast. Since April, the series of higher pivot highs and lows has continued uninterrupted. The moving averages are stacked atop each other in bullish fashion. And with the current upswing, momentum is smashing through the roof. The RSI just tagged 80, a new high for the year.
Year-to-date, Square has risen a blistering 155%.
Excited spectators must balance out the excellent strength with the extreme overbought readings that are beginning to mount. Heck, Square has risen 24% on this upswing alone! Long-term success as an active trader requires sound entry points. Consider these the type of setups that offer low risk and high potential reward.
Is this a low-risk entry for deploying new bullish SQ plays?
No!
If I were a short-term trader, I’d be taking profits or tightening stops to lock-in gains at this stage. New bulls piling in now run the risk of getting caught in the inevitable pullback or pause that is sure to materialize after such a steep rise. Any kind of retreat toward the low $80’s should set up a better buying opportunity.
A Safer Way to Play SQ Stock
If you’re intent on chasing Square at these nosebleed levels, my best advice is at least scale-in. That is, buy a little now, but leave yourself open to acquire more at lower prices. That way you’ll be able to use a drop in price to your advantage instead of looking on with regret that you piled in near what could be a short-term high.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
