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Is Square Inc (NYSE:SQ) Setting Up the Bounce Trade Into Earnings?

Square Inc (NYSE:SQ) shares have been in a very sharp pullback over the past couple of weeks, dropping nearly 40% at one point in that time. The company is barreling toward Q3 earnings after ramping its new Cash app into place to much fanfare. Now, the company is putting the next piece of the puzzle on the board, recently announcing the launch of its Square Terminal product, which it dubs ”an integrated and innovative all-in-one card processing device designed to be fast, fair, and secure”.

The company is getting set to post its Q3 data in about two weeks. With the stock down sharply over the prior two weeks, and weak hands likely already shaken off the boat, we may be seeing a striking bounce setup come together, particularly if the stock can manage one more leg to the dip this week.

Square Inc (NYSE:SQ), for a little background, bills itself as a company that provides payment and point-of-sale solutions in the United States and internationally.

The company’s commerce ecosystem includes point-of-sale software and hardware that enables sellers to turn mobile and computing devices into payment and point-of-sale solutions.

It offers hardware products, including Magstripe reader, which enables swiped transactions of magnetic stripe cards; Contactless and chip reader that accepts Europay, MasterCard, and Visa (EMV) chip cards and Near Field Communication payments; Chip card reader, which accepts EMV chip cards and enables swiped transactions of magnetic stripe cards; Square Stand, which enables an iPad to be used as a payment terminal or full point of sale solution; and Square Register that combines its hardware, point-of-sale software, and payments technology, as well as managed payments solutions.

The company also provides Square Point of Sale software; Cash App, which provides access to the financial system, allowing customers to electronically send, store, and spend money; Caviar, a food ordering platform for restaurants to offer food ordering, pickup and delivery, to their customers; and Square Capital that facilitates loans to sellers based on real-time payment and point-of-sale data.

Square, Inc. was founded in 2009 and is headquartered in San Francisco, California.


An Invitation?

As we discussed earlier, SQ recently announced the launch of its Square Terminal product, which it dubs ”an integrated and innovative all-in-one card processing device designed to be fast, fair, and secure”.

“We love how the hardware, payments, and printer are all part of one device,” said Fabrice Borg, manager of Prive by Laurent D Salon in New York, NY. “Square Terminal makes for a more seamless and professional experience when we bring the terminal to our customers and they can pay for their services right from the salon chair.”

Even with that news, the action hasn’t really heated up in the stock, with shares moving net sideways over the past week after its very steep declines earlier this month.

“Payment terminals are everywhere, from liquor stores to dry cleaners to dentists, and with Square Terminal we can now serve these sellers better with new, elegant hardware on top of Square’s fair and secure payments service,” said Jesse Dorogusker, Head of Hardware at Square. “Square Terminal is designed from the ground up to ensure a feeling of familiarity, so sellers and their customers can use it right away. With Square Terminal, we now offer a sophisticated and modern hardware-plus-software solution for every type of business.”

Square Inc (NYSE:SQ) generated sales of $814.9M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 21.9% on the top line.

In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($1.6B against $1.3B).

This is still a strong uptrend. The violent pullback will likely spell some kind of opportunity. For traders, a test of the rising 200-day simple moving average (now trading just above the $60 level) would likely create the most inviting setup.

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