New Block Price Target as Fintech Stock Shows Signs of Life
Block shares appear ready to break out. Here's a low-risk strategy for trading this Jack Dorsey-founded name.
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Is Block XYZ about to rock?
Block has been on a roll lately. On Monday, the fintech firm closed at its highest price since February.
Founded in 2009 by Jack Dorsey, Block was originally a credit card payment processing firm, and has now expanded into a broader financial technology company. Block is the parent company of Cash App and music streaming service Tidal, among other ventures. The company also holds about $1 billion in bitcoin.
Long-Term Performance Has Been Lacking
If you’re a long-term shareholder of Oakland-based Block, formerly known as Square, your patience has been severely tested. To say this stock has underperformed the market is an understatement.
If you purchased this stock five years ago, you’re currently sitting on a 48% loss. If you’ve held Block since the start of this year, you’re down by 7% on a tech stock, in a year in which the major indexes, led by tech, have made a series of new highs.
Block Is Showing Signs of Life
Despite this, Block has put on a good performance recently. Since May 2 (point A), Block has been on a tear, gaining 74% in just under four months.
May 2 is also the approximate low point of a large cup-and-handle pattern (shaded yellow) that has been forming over the past six months. Based on this pattern, along with the stock’s momentum and the market’s resilience, we see Block hitting $100 within the next six months.
Block’s 50-day moving average (blue) just crossed above its 200-day moving average (red), which some traders consider a sign of positive momentum (point B).
Fintech stocks have been a mixed bag, but overall, their performance has been strong. SoFi Technologies SOFI has been amazing, gaining our readers about 75% over the past two months, as indicated here. Nu Holdings Ltd. NU has struggled at times, but has still managed to gain 38% year-to-date.
What’s the Strategy?
Since this stock has yet to break out, a low-risk method for trading Block would be to open a small position here in anticipation of a breakout. By small, I mean one-third to one-half of a normal-sized position.
Then, if a breakout does occur, we can add to our existing position. If the breakout doesn’t materialize, and the stock fades, we’ll simply close our small initial position.
At the time of publication, Ponsi was long XYZ and SOFI.
