Today, U.S. equities ended the session on a bearish note. Confirming the move down, cryptocurrencies also pulled back, erasing most of yesterday's gains. Markets continue to move in lock step, and until that changes, we should continue to treat equities and cryptocurrencies correlated. On today's post I am looking forward at next weeks earnings report for SQ and also checking in on the QQQ.
Cashing it in!
Square, Inc. (SQ) reports its fiscal quarter one results on May 6th. The view is that SQ should perform well despite taking a hit due to Covid-19. This because SQ generates a large portion of their revenue from small to medium sized businesses who pay fees for their sales. These businesses, as you all know, have been severely impacted by the economic shutdown.
Luckily, for SQ, the success of their CashApp could be the company's saving grace. Last quarter SQ reported an impressive 60% increase in users, year-over-year. Furthermore, SQ has expanded their business beyond sales. Now offering loans to seller and payroll services. If you haven't used their app, I'd give it go. Enough talk of fundamentals and lets get to the chart.
Above is the 4-hour chart of SQ. Although not showing RSI divergence, SQ is nearing over head resistance in the low $70 region. Price is slowly grinding its way up toward a confluence of the 0.786 fibonacci and a descending trendline. If you zoom into lower time frames, you can see a cup and handle pattern developing, see chart below. SQ could be consolidating for a further move to the upside. The measured target is approximately $73 for the cup and handle.
The daily close, however was discouraging. SQ could experience a pull back toward the bottom of the trading range and on earning day pop a bit. Although I do like the fundamentals and story of SQ, I always revert back to my rules when uncertain. That is, that bullish patterns tend to FAIL in bear markets. Short term...Bias: Bearish.
Are the Bull Finally Exhausted?
Could today have marked the end of the historic rally? Yes, the technicals point to exhaustion. With all the big tech names having reported their earning for fiscal quarter one maybe the market takes a long breather. Below I have the daily chart along with my current Elliot wave picture. There have been 5 waves up from the low. Which indicates the beginning of a larger 5 wave sequence OR the early stages of a Zig Zag ABC correction. I am leaning toward a zig zag correction. Nevertheless, we should now be looking for a pull back toward the 50% or 61.8% fibonacci retracement level, also see below.
To make matter more bearish, today's daily candle painted a hammer reversal. The April 17th candle close (iii) should have served as a warning for traders that the market was exhausting.
In conclusion, there is a greater likelihood that the top is in for the rally. Price should settle near the top of this range before making its decisive move lower or higher. My bet is lower. Bias: Bearish.
New Lows?
I can't count how many articles I have read titled, "Lows will be retested" and Lows will not hold!" How about, I agree but also disagree. I personally think the low is in right now, but I do not think this is the end of the bear market. In my opinion, I think the market has been in a correction since October 2018 and the correction will continue for another year or two. I'll leave that analysis for another post. Until then, have a great evening!
Cashing it in!
Square, Inc. (SQ) reports its fiscal quarter one results on May 6th. The view is that SQ should perform well despite taking a hit due to Covid-19. This because SQ generates a large portion of their revenue from small to medium sized businesses who pay fees for their sales. These businesses, as you all know, have been severely impacted by the economic shutdown.
Luckily, for SQ, the success of their CashApp could be the company's saving grace. Last quarter SQ reported an impressive 60% increase in users, year-over-year. Furthermore, SQ has expanded their business beyond sales. Now offering loans to seller and payroll services. If you haven't used their app, I'd give it go. Enough talk of fundamentals and lets get to the chart.
Above is the 4-hour chart of SQ. Although not showing RSI divergence, SQ is nearing over head resistance in the low $70 region. Price is slowly grinding its way up toward a confluence of the 0.786 fibonacci and a descending trendline. If you zoom into lower time frames, you can see a cup and handle pattern developing, see chart below. SQ could be consolidating for a further move to the upside. The measured target is approximately $73 for the cup and handle.
The daily close, however was discouraging. SQ could experience a pull back toward the bottom of the trading range and on earning day pop a bit. Although I do like the fundamentals and story of SQ, I always revert back to my rules when uncertain. That is, that bullish patterns tend to FAIL in bear markets. Short term...Bias: Bearish.
Are the Bull Finally Exhausted?
Could today have marked the end of the historic rally? Yes, the technicals point to exhaustion. With all the big tech names having reported their earning for fiscal quarter one maybe the market takes a long breather. Below I have the daily chart along with my current Elliot wave picture. There have been 5 waves up from the low. Which indicates the beginning of a larger 5 wave sequence OR the early stages of a Zig Zag ABC correction. I am leaning toward a zig zag correction. Nevertheless, we should now be looking for a pull back toward the 50% or 61.8% fibonacci retracement level, also see below.
To make matter more bearish, today's daily candle painted a hammer reversal. The April 17th candle close (iii) should have served as a warning for traders that the market was exhausting.
In conclusion, there is a greater likelihood that the top is in for the rally. Price should settle near the top of this range before making its decisive move lower or higher. My bet is lower. Bias: Bearish.
New Lows?
I can't count how many articles I have read titled, "Lows will be retested" and Lows will not hold!" How about, I agree but also disagree. I personally think the low is in right now, but I do not think this is the end of the bear market. In my opinion, I think the market has been in a correction since October 2018 and the correction will continue for another year or two. I'll leave that analysis for another post. Until then, have a great evening!