Benzinga - by Melanie Schaffer, Benzinga Editor.
Block, Inc (NYSE: SQ) gapped up over 5% Thursday as the company heads into its third-quarter earnings print after the close.
When Block printed a third-quarter earnings beat on Aug. 3, the stock plunged almost 15% the following day.
For the second quarter, Block reported revenue of 5.54 billion, which beat the $5.08-billion consensus estimate. The company reported earnings per share of 39 cents, beating a consensus estimate of 35 cents.
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For the third quarter, analysts, on average, estimate Block will report earnings per share of 45 cents on revenues of $5.43 billion.
Ahead of the event, Wells Fargo analyst Jeff Cantwell initiated an Equal-Weight rating on Block and announced a price target of $45. The new price target is in line with the current share price.
From a technical analysis perspective, Block’s stock looks neutral heading into the event, trading in a downtrend but forming bullish divergence 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: Despite gapping up to start Thursday’s trading session, Block remains trading in a downtrend, making a consistent series of lower highs and lower lows. The stock’s most recent lower low was printed on Friday, Monday and Tuesday at $38.89 and the most recent confirmed lower high was formed at the $46.15 mark on Oct. 24.
- Block’s downtrend is taking place under a descending trendline, which is continuing to push the stock lower. On Thursday, Block attempted to break up through the trend line but failed and wicked slightly down from the area, suggesting the pattern is being recognized.
- If Block receives a bullish reaction after its earnings print and breaks up through the trend line, a longer-term reversal could be in the cards. Bullish divergence has developed, with the relative strength index making a series of higher lows, which suggests an eventual rebound is likely.
- Bearish traders want to see Block push back down under the eight-day exponential moving average following the event, and then for big bearish volume to force the stock under the $38 dollar mark. If that happens, Block will trade at a level not seen since April 2020 and downside pressure could accelerate.
- Block has resistance above at $46.54 and at $53.97 and support below at $38.39 and at $35.
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