Trading Strategies For Block Stock Before And After Q4 Earnings

Block, Inc SQ was trading slightly lower Thursday as the company heads into its fourth-quarter earnings print after the close.

When Block printed a third-quarter earnings beat on Nov. 3, the stock surged 11.5% higher the following day.

For the third quarter, Block reported revenue of $4.516 billion, which beat the $4.5-billion consensus estimate. The company reported earnings per share of 42 cents, massively beating a consensus estimate of 24 cents.

For the fourth quarter, analysts, on average, estimate Block will report earnings per share of 30 cents on revenues of $4.6 billion.

Ahead of the event, KeyBanc analyst Josh Beck maintained an Overweight rating on Block and raised the price target from $90 to $100. The new price target suggests about 40% upside for the stock. Read about more analyst price targets here.

From a technical analysis perspective, Block’s stock looks neutral heading into the event, trading in a downtrend but above the 200-day simple moving average (SMA) on the daily chart. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

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The Block Chart: Block burst up through the 200-day SMA on Jan. 20 and continued in the trend until topping out at the $89.97 mark on Feb. 3. Block then entered into a downtrend, almost coming back to retest the 200-day SMA as support.

• During the second leg of the downtrend, which began on Feb. 15, Block may have settled into a bear flag pattern, with the downward sloping pole formed between that date and Feb. 21 and the slightly upwards pole developing over the last three trading days. If the pattern is recognized, the measured move is about 13%, which suggests Block could fall toward $65.
• If Block breaks down from the bull flag pattern, the measured move may be cut short by the 200-day SMA, which is likely to act as support. If Block falls under that area, a longer-term downtrend could be in the cards.
• If Block receives a positive reaction to its earnings print and surges higher above $83, the downtrend will be negated and an uptrend could be in the cards. If that occurs, the recent downturn is likely a healthy back test of the 200-day SMA and bulls will have more confidence going forward.
• Block has resistance above at $78.19 and $87.25 and support below at $69.60 and $62.50.

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Photo courtesy of Block.