Facebook (FB) has long held status as a market darling.
Soon after its IPO in 2012, FB was languishing around $20 when bears like me (at the time) were waiting for the stock to drop below $15. From there the stock launched into a near moonshot to the last all-time closing high of $133.28 on October 24, 2016. When the stock gapped down on earnings in early November, I assumed that the sell-off would present yet another buy-the-dip opportunity for following the persistent uptrend. Yet, THIS time is looking different. For the first time since its struggles at its 200-day moving average in 2013, FB has not used this critical uptrend support line as a quick springboard to future gains.
FB broke down below 200DMA support in the days after the U.S. Presidential election. Its rebound was short-lived as the last two days brought back heavy selling volume and a fresh 200DMA breakdown. FB closed right at the low from the last 200DMA breakdown. If the stock closes lower, it will confirm the 200DMA breakdown and likely usher in a more extended duration of selling.
Source: StockCharts.com
Source: FreeStockCharts.com
The 50DMA adds to Facebook’s ominous technicals – this trendline is now pointing downward and stands ready to cap any rallies that manage to break above the 20DMA. Note how FB’s last rebound hit a brick wall at the sharply declining 20DMA. If FB breaks below the June low, I will assume a confirmation of some kind of top for FB.
Traders and investors have well-noted the rotation out of technology stocks and into financials, commodities, and industrial stocks since the election. It looks like Facebook could become the poster child of the race out of high-tech.
Keep an eye on $FB, says @jimcramer. "It's the biggest source of funds out there." Stock "can't get any traction."pic.twitter.com/2CBFT8SKJl
— Carl Quintanilla (@carlquintanilla) December 1, 2016
January is typically a time when short-term traders can flip stocks which were beaten down in December by tax-related selling. I am wondering whether FB will join the list but as a stock sold off for its profits rather than its losses…
Be careful out there!
Full disclosure: no positions
So where do you anticipate a bottom? I too agree with you. Seems Andrew Left has it right. $108.23 is the June low, the line in the sand because it is not only the Brexit low but also the bottom of FB’s 4 year old uptrend channel. The moonshot you write about. I still believe the company is pumping on all cylanders but it’s also important to step aside when sentiment is changing towards a particular company and its stock. I think there will be lots of bounces along the way but Inam now a believer that FB stock will reach $100 or below by Jan. I do have to make note that I think management must be anticipating this or why do a buyback in Q1? The lower the price the better, right? I might have to join Andrew Left and short FB on every bounce.
It is hard to anticipate a “final” bottom at this point. Best to just follow the technicals step-by-step. A big variable is how the market will respond to this stock rotation in January. Right now, we have some major adjustments going on with the big money that got caught flat-footed by the election and its aftermath. A stock like FB is fat with profits that can be used to load up on the “pro-Trump” plays. This repositioning should be over by January earnings. And then what? Earnings news should dominate again… Stay tuned as they say!