Payments Under the Christmas Tree

Payments growth leader Square has fallen off the radar from many traders for a good while now, and rightfully so.

On the second weekly chart, below, Jack Dorsey's other firm, SQ, topped out back in very early-October 2018 and has since been a glaring laggard amid various cycles when software and growth stocks were hot as can be. Since late-September of this year, SQ has at least stopped going down and is currently trying to stabilize around the $60 level. 

Simply put, if SQ loses $60 again and fails to immediately regain it, all bets are off for longs. 

However, what jumps out this morning is the recent surge in Bottomline Technologies (EPAY), another payments play in the software space. 

On the first weekly chart, below, you will now how EPAY topped out during the exact same time that SQ did over thirteen months ago. Since then, both stocks have fallen to the wayside. But with EPAY waking up over the last two weeks and currently flagging tightly above its 200-day moving average, combined with a broad market generally improving, I am looking for SQ to follow suit into the holidays. 

In other words, the risk/reward profile for a Square long into Christmas seems like an increasingly good bet as the name has likely already served its purpose during a prolonged correction of, first, scaring out longs, before, secondly, wearing them out as they succumb to apathy. Put another way, when it the last time you heard someone pound the table for the bull case on SQ? That type of sentiment much more resembles the sort of apathy you see before a name turns back higher. 

I view the $65 area as the initial hurdle to clear for SQ longs. But looking out the next few years, the payments growth story is likely still in the early innings.