Square, Inc. (SQ) shares have fallen nearly 10% over the past week to their 50-day moving average at around $40.00. In late January, the company announced that its Cash App customers would be able to immediately buy and sell bitcoin, which sent shares to their reaction highs of around $47.00 before the recent move lower. The sharp decline in cryptocurrency valuations could be leading to less speculation in those areas.

Analysts have remained largely bullish on the stock. In late January, Nomura's Dan Dolev increased his price target to $64.00, which represents a significant premium to the current market price. Among other things, the analyst cited increased penetration of higher-priced transaction types and higher-margin services like Square Capital and payroll as catalysts for the stock, adding to speculation that it could become an entrenched leader in payments. (See also: 4 Reasons Square's Gains Can Multiply: Jefferies.)

Technical chart showing the performance of Square, Inc. (SQ) stock

From a technical standpoint, the stock broke down from a symmetrical triangle pattern to its 50-day moving average at $39.81. The relative strength index (RSI) appears relatively neutral with a reading of 41.69, but the moving average convergence divergence (MACD) remains in a bearish downtrend dating back to earlier this month. These technical indicators suggest that traders should maintain a bearish bias on the stock over the near term.

Traders should watch for a breakdown from the 50-day moving average to retest reaction lows at around $34.00. If these levels are broken, the stock could move to the 200-day moving average at $30.81. A rebound from the 50-day moving average could lead the stock to retest trendline resistance at around $47.00 or prior all-time highs of around $50.00, but the bearish MACD reading makes this less likely without any new fundamental justification. (For more, see: Square Is Becoming a Bank.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

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