How To Play Square's Crazy 14-Day Winning Streak

With the stock under pressure in early Friday trading, Square Inc SQ investors are at risk of seeing something in their portfolio they haven’t seen in nearly three weeks: the color red. Since the stock last closed in the red on Sept. 22, Square has delivered an incredible 14 consecutive days of gains which have sent the stock higher by nearly 19 percent.

Stocks typically don’t move in one direction for an extended period of time without a retracement at some point along the line. But with Square staring down its first red day in three weeks, traders are now trying to figure out if Friday’s session is just a bump in the road or the end Square’s rally.

Square’s Steady March

Square has been one of the hottest stocks in the market in the past year, nearly tripling in value.

Square initially stumbled out of the gates following its IPO in Nov. 2015. IPO investors were in the red within months when the stock dipped below its $9 IPO price to as low as $8.06 in Feb. 2016 and $8.42 again in June 2016. However, after that June dip, the stock began its steady march higher and never looked back. Square’s 50-day and 200-day simple moving averaged delivered a golden cross In September 2016, and the 50-day SMA has served as support ever since.

Related Link: Square Gets Hip: More Upside To Come Despite Year-Long Run

A Similar Pattern

Square may not have another 14-day winning streak in its track record, but it has come close. Back in May, Square delivered 14 gains over a stretch of 15 sessions as the stock rallied from $19.45 to $24.97.

For traders looking for history to repeat itself, the stock drifted mostly sideways as it consolidated after the previous streak in May. The consolidation lasted roughly a month before Square resumed its march higher.

Levels To Watch

If Square once repeats the pattern, traders should expect the stock to trade between $33 and $27 over the next four or five weeks but should be on the lookout for a breakout higher. They should also keep an eye on the 50-day SMA for signs of any potential breakout to the downside.

For longer-term investors, Oppenheimer analyst Jed Kelly said on Thursday that patience will be rewarded. Kelly initiated coverage of Square with an Outperform rating and a $35 price target.

Joel Elconin contributed to this report.

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