The last time I penned my thoughts on Facebook (FB), it was May 17 and the stock was trading around the $26 mark. I believed Facebook stock was in “no-man’s land,” as FB continued to trade well within the confines of a bull-flag type formation.
I further noted that I wouldn’t turn decidedly bullish on the stock until such time that it managed to hurdle itself above the $29 area, which marked the May reaction highs and resistance dating back to February.
Fast-forward to the present day, and following the monster post-earnings rally in Facebook stock, shares on Tuesday came within four pennies of revisiting their IPO price of $38, last seen on their first day of trading May 18, 2012.
Speaking of last week’s rally, note that in one day, FB blasted out of its almost seven-month bull flag formation, cleanly jumped over the $29 area resistance area, and even managed to surpass its next lateral resistance area around the $33 area.
In other words, it was one heck of a breakaway gap.
Such powerful moves often have a few more days of upside momentum before they need to take a near-term breather, and that’s what I see in store for Facebook stock. The post-earnings rally now amounts to a 40%-plus move, and from where I stand, that’s not something I want to chase.
While the breakaway gap was powerful and should be respected through the eyes of a medium-term time-frame, in the near-term, I believe those looking to leg into a long-side position in this name will get marginally better levels in coming days/weeks.
Last but not least, it is conceivable that with shares now back to their IPO levels, some investors might be looking to unload Facebook stock here to call it a breakeven trade and move on.
Just some food for thought.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here. As of this writing, he did not hold a position in any of the aforementioned securities.