H&R Block (HRB) stock: 20% plunge just broke a five-year trendline

H&R Block, the well-known leader in tax preparation services, has seen a painful, steep 20% decline since its earnings report on November 6th. The strange part? The company actually reported an earnings-per-share (EPS) beat on expectations and showed strong year-over-year operational improvement.

The main disappointment, which triggered this sharp sell-off, was the company’s decision to simply reaffirm its full-year guidance rather than raising it. In a bull market, not exceeding expectations can be penalized just as heavily as missing them entirely. This drop has now pushed HRB firmly into near-term oversold territory, making the technical picture particularly volatile.

The five-year trend is under attack

Our technical analysis reveals that HRB has been trading reliably within a well-defined inclining parallel channel ever since the market bottomed out following the Covid crash in March 2020.

However, this week’s aggressive drop has pushed the price just slightly beneath the bottom boundary of this critical, long-term parallel, which sits right around $41.71. A confirmed weekly close beneath this $41.71 level would signal a major, long-term break of trend. Should that confirmation occur, the next significant structural support target for HRB immediately drops to $37.31.

The oversold bounce scenario

Despite the severe technical breakdown, the stock is showing signs of being too cheap in the short term. The Relative Strength Indicator (RSI) on the weekly time frame currently sits at 26.94. Since anything below 30 is considered oversold, a significant near-term technical bounce is highly probable.

For those watching a potential bounce, the next key resistance level is $47.05. Since HRB closed Monday beneath that critical $41.71 parallel channel, a weekly close back inside the channel is mandatory to confirm the momentum reversal. If the stock manages to reclaim the channel this week, probabilities drastically increase for a re-test of $47.05, followed by the potential next level at $50.26.