Wednesday, February 06, 2013

Facebook

Here is a daily chart of Facebook (FB). Facebook had its IPO last May and reached a high of 45 on its first day of trading. Subsequently the stock dropped 60%, partly because of the looming supply of stock from insiders once the lock-up period ended.

FB made its low at 17.50 last September and since then has moved steadily higher. If you look closely on this chart you will see that the red arrow points to the position of the 175 day moving average - a short red streak just above the purple dash line. FB has not yet traded for 200 market sessions and until it does I will use the 175 day moving average as a substitute for the 200 day moving average.

You can see that the market has recently dropped to its rising 50 day moving average (wiggly green line) which is visibly above the 175 day moving average, a bullish configuration. The midpoint (purple line) of the rally from the 17.50 low is at 25, just below the position of the 175 day moving average. As long as FB shows no preference for trading below that level I think its longer term trend will remain upward.

The recent drop started from just above the midpoint of the drop from 45 to 17.50 (red dash line). The first obvious support point is just below the market at 27.25 and is where the current reaction would equal the size of the biggest reaction on the way up (blue rectangles).

A reasonable upside target for FB is its historical high at 45 (green oval). But if the market gets that high I doubt it will stop so I think a better guess would be the 50 -55 range for FB over the next year or so.

2 comments:

Michael Wagner said...

Carl, can you take a moment to revisit the "Three Peaks & A Domed House" pattern and overlay the current Dow or S&P on it?

Thanks!

Bruno h said...

Carl,
could you please give an updtae on Facebook stock analysis?
Thanks