SQ shares gapped lower after earnings earlier this month
Jack Dorsey's Square Inc (NYSE:SQ) sold off earlier this month on a disappointing outlook, but J.P. Morgan Securities in a note this morning said traders should be into the weakness. More specifically, the brokerage firm believes U.S. payments processors as a whole are set to outperform over the next year, and it sees the most growth for Square due to gross payment volume (GPV) stabilization. The analysts upped their price target to $87 from $86.
Options traders have kept the faith in SQ, too. The security's 10-day call/put volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 2.44, and ranks in the 71st annual percentile. So not only has call buying doubled put buying in the last two weeks, but the interest in long calls over puts has been stronger than normal.
The option that saw the largest increase in open interest during this time was the September 65 call, and data confirms mostly buy-to-open activity at the strike. Meanwhile, peak open interest is at the September 80 call, where there's been a fairly close mix of buying and selling. Call open interest overall ranks in the 83rd annual percentile right now. Regardless how traders are positioned right now, Square as certainly been a very volatile name in the past year, with its Schaeffer's Volatility Scorecard (SVS) coming in at 95 out of 100.
J.P. Morgan Securities' call this morning could have some merit based on the fact that SQ's 14-day Relative Strength Index (RSI) was down at 27 as of Wednesday's close, showing the equity's been technically oversold and could be due to bounce. The shares could also be seeing technical support at the round $60 level, which acted as support in early June. After settling at $61.55 yesterday, the security is trading up 1.1% before the open.