It isn’t easy to short Facebook especially after we made healthy profits off of the $26.08 level but this is a business. The afterglow of earnings appears to be fading but the time to short Facebook is not quite here. Down volume bars continue trend above average but are trending lower. The stock trades below the lower band of it’s prior uptrend channel with topping tails paying respect to prior support now being resistance. Lesson to new technicians Topping Tails on Japanese Candlesticks = Sellers above. It is a not so subtle observation and one that must be respected. The $46.50 level is critical support for Facebook. A close below that level on rising down volume may be the signal for us to open our short trade. To those who are reading and despise what I am saying because you love the stock ask yourself the question. Does the stock love you? Don’t let emotion cloud your judgement. The signs are there but the all clear has not been sounded.
Now, is there a case that can be made to buy Facebook? Yes,having the 50 day moving average in your corner is a very powerful friend to have. The bigger picture bull story is the fact that we have yet to make a new weekly low. For new chart watchers out there stop watching the daily and intra-day charts. They are for amateurs. The key signals to any major directional move move to to watch the weekly and monthly charts for signs of a breakdown. Facebook is way to young to be using monthly charts to omit them. The weekly charts have plenty of data points to watch. My guess is that we make another run towards the highs but the key will be to watch for a lower high. The prior high was $54.83. Watch for resistance at the $52.09 level. If it stalls at that level you can bet that shorts will be emboldened to open positions and then adding to those positions on a breakdown below $46.50. If we rally past $52.09 on good up volume then the stock is an accumulate / buy with a trailing stop loss. If we breakout above $52.09 it is a continuation breakout and you can expect the shorts to stop out as they get squeezed by momentum traders. I don’t like hearing about young traders losing money so if you decide to short Facebook use a stop loss order please!
We’ll be watching Facebook closely.