For some time, I stayed away from social media giant Facebook (NASDAQ:FB) because it was involved in a media blizzard and was simply too laden with emotions for my liking. However, now that the company is no longer making front-page headlines on a daily basis, has some trading history and has arrived at an interesting technical level on the chart, I am warming up to the idea of swing-trading the stock.
After Facebook cratered just about 60% in price for the first three-and-a-half months of trading, the autumn winds ironically allowed the stock to slowly stabilize. By the second half of November, FB had established a solid floor around the $18-$19 area, a higher low vs. the summer lows, which set the stock up for better technical behavior through late January 2013.
Just like the late summer 2012 lows act as good support, the zone between $32.50 (January 2013 highs) and $33.50 (June 2012 highs) acts as meaningful resistance (until broken, of course). This resistance area also formed just north of the 50% retracement line of the entire move from the IPO-day high down to the September lows, thus further confirming the area’s significance.
While the January high at $32.50 is the level to breach on the upside, in the nearer-term, Facebook stock has found lateral support at the $28 mark, which acted as resistance in December. We need to see a meaningful reversal day to the upside if the stock wants to bounce here, and should $28 break, the next lower support I would look for would be between $24 and $25.50.
This area also happens to represent a so-called confluence zone of support, as lateral support coincides with an area between the 50% and 61.8% Fibonacci retracement of the swing higher from the November lows.
The $24 area should hold as final support if the stock wants to eventually try another higher-probability run toward (and potentially past) the late-January resistance zone. Any break below $24 would cancel the bullishness of the late 2012 rally and require re-evaluation of the chart.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.