Square Stock Could Return To Record Highs Next Month

After adding 154% in 2017, Square Inc (NYSE:SQ) stock has continued this torrid pace in 2018, adding 38% year-to-date to trade at $47.83. Toward the end of March, however, the software stock lost steam, and is pacing for a third straight weekly losses. If history is any guide, though, it could be time to bet on the payment processor's return to form.

Specifically, the shares have pulled back within one standard deviation of their rising 80-day moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, after the previous five times SQ stock pulled back to this moving average after spending a significant amount of time above it, it's averaged a 21-day gain of 20.15%, and was higher every time. Another move of this magnitude would have the shares flirting with record highs once again.

A short squeeze could help the stock's ascent. Short interest accounts for nearly 15% of the stock's total available float, after a 13.1% increase in the last two reporting periods. Many analysts share this pessimistic outlook. Of the 29 brokerages covering SQ stock, 13 rate it a "hold" or "strong sell" and the security's average 12-month price target of $48.97 is right above the current perch, implying there's more room on the bullish bandwagon.

Finally, it's worth noting the security has been good to premium buyers in the past year. The stock's Schaeffer's Volatility Scorecard (SVS) comes in at a lofty 95 out of 100. That means SQ stock has exceeded options traders' volatility expectations during the past 12 months.