Block, Inc. (NYSE: SQ) seems poised for a price surge based on its latest charts. The company builds ecosystems focused on commerce and financial products and services in the United States and internationally. It operates through two segments, Square and Cash App.

Bullish Indications

#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock had recently formed a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as purple color lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern which is a possible bullish sign.

SQ – Daily Chart

#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, indicating that the bulls are still in control. This is a positive indication.

#3 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below the –DI and +DI lines. This indicates possible bullishness.

#4 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.

#5 Breakout from Consolidation area: The weekly chart shows that the stock has been consolidating within a price range for the past few weeks. This area is marked as a pink rectangle. The stock has now broken out from this consolidation area and is currently trading above it. The breakout level of this consolidation area typically acts as a good support level. The stock is also trading above its 50-week  SMA, indicating that the bulls are gaining control.

SQ – Weekly Chart

#6 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart, indicating bullishness.

#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, you can purchase shares of SQ above the price of around $92.70.

TP: Our target prices are $106 and $116 in the next 3-6 months.

SL: To limit risk, place stop-loss at $85.00. Note that the stop-loss is on a closing basis.

Our target potential upside is 14% to 25% in the next 3 to 6 months.

For a risk of $7.70, our target rewards are $13.30 and $23.30. This is a nearly 1:2 and 1:3 risk-reward trade.

In other words, this trade offers nearly 2x to 3x more potential upside than downside.

Risks to Consider
The stock may reverse its overall trend if it breaks down from the symmetrical triangle pattern with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.

Happy Trading!

Tara

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Source: Trades of the Day