Facebook Stock: Almost Back to Square One!

by Serge Berger | July 31, 2013 8:59 am

The last time I penned my thoughts on Facebook (FB[1]), it was May 17 and the stock was trading around the $26 mark. I believed Facebook stock was in “no-man’s land,”[2] 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.

FB Facebook Stock: Almost Back to Square One!
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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[3]. Sign up for his free weekly newsletter here[4]. As of this writing, he did not hold a position in any of the aforementioned securities.

  1. FB: http://studio-5.financialcontent.com/investplace/quote?Symbol=FB
  2. Facebook stock was in “no-man’s land,”: http://investorplace.com/2013/05/facebook-stock-is-in-no-mans-land/
  3. The Steady Trader: http://thesteadytrader.com/
  4. free weekly newsletter here: http://forms.aweber.com/form/42/1636996642.htm

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