Square Inc. (SQ), $Block(SQ)$ $a financial technology company providing payment and point-of-sale services to businesses and individuals, released its earnings report after the market closed yesterday and rallied as high as $81 post market which is 9.24% increase from yesterday closing price of $74.15.
At the time of writing, the pre-market high was $80.47 (+8.43%).
Based on the daily chart below, the critical price level is $80 (blue line), with resistance around $90 (green line) and support around $76 (red line).
Price level of SQ (day chart)
If the stock stays above $80 after market open, I will consider buying a PUT $SQ%2020230303%2090.0%20PUT$ $SQ 20230303 90.0 PUT$ at $90 expiring next week.
If it drops and stays below $80, I will consider buying a CALL $SQ%2020230303%2076.0%20CALL$ $SQ 20230303 76.0 CALL$ at $76 expiring next week.
I am leaning towards buying the PUT option although the resistance price level is quite strong but as always, I will take small profits and keep my earnings small when available.
Let's take a look at the past four quarters' movement of the stock following earnings for reference:
4 Nov 2022: The stock rose by 14%, with the company reporting quarterly revenue and profit that beat Wall Street forecasts. The payment service operator’s subscription-based revenue jumped 71% from a year ago.
4 Aug 2022: The stock fell 6% overnight despite earnings beating analyst estimates. The company reported a loss of $208 million, or 36 cents per share, on revenue of $4.4 billion. The issue was Bitcoin (BTC-USD), as Block CEO Jack Dorsey has been a big advocate for cryptocurrency, actively trading through the company's Cash App. Its spread from Bitcoin trading fell 24% to $41 million.
5 May 2022: The stock rallied in pre-market trading, despite missing expectations with its latest earnings report. Shares of the payment processing company rose 4% before the opening bell, rebounding from a nearly 11% drop seen the previous session.
24 Feb 2022: The stock also staged a substantial pre-market rally, driven by a strong quarterly report. The payment platform exceeded projections on both its top and bottom lines.
So why is a stock like BLOCK popular with traders? For one, the company has strong growth potential, with its revenue and earnings per share growing at a high rate. This growth potential could attract investors who are looking for companies likely to perform well in the future. Another reason is the company's role in the financial technology industry. As more and more consumers and businesses shift towards digital payments, companies like BLOCK are likely to benefit, leading to increased demand for the company's services and higher stock prices.
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