With Facebook (FB) trading close to 40% above its 2012 IPO price of $38 in recent days, and with Facebook earnings scheduled for Wednesday afternoon, it’s time to have an updated look at FB charts and map out a few reference levels to focus around.
Facebook earnings are expected to tally 19 cents per share on $1.91 billion in revenue. This would compare favorably to the same quarter last year for FB, where Facebook earnings or 12 cents revenue of $1.26 billion was reported.
I last discussed the state of the FB stock chart and took a bullish stance on Aug. 26, when Facebook stock was trading some 21% lower and had just surpassed its IPO price. At that point, FB still sat well below its intra-day high from the IPO day, around the $45 mark.
In the meantime, Facebook stock staged another impressive rally which has surpassed its 2012 highs and allowed share of FB to soar to new highs.
The company is still relatively new in the public markets and we don’t yet have much history of how violently FB stock tends to react to earnings. Still, traders and investors would wise to remember that after second-quarter Facebook earnings in July, FB stock jumped 30%. That rally on July 25 led FB to break past a variety of resistance levels and allowed it to accelerate higher.
Through this 18-month lens, a good support area for FB currently comes in around the $45 to $46 area, which now is a confluence zone made up of the 50-day moving average (yellow line) and the stock’s highs on the day of its IPO.
Should the stock tank after Facebook earnings, this is a good support level to circle.
On the daily FB stock chart below, the support area around $45 to $46 is better visible, as is the first upside resistance area. Last week’s highs around $54.80 is a good upside resistance level. If FB stock can overcome it easily, shares could move toward the $60 level.
All in all, I am looking to wait for Facebook earnings to pass before making a trade. Depending on where FB stock trades after the results in relation to the support and resistance areas discussed above, I will look to let into a trade.
And for any stock, patience around earnings reports is key. Give enough time for emotions to settle before making trading decisions. Letting the excitement around an earnings report get the better of you and lure you into a trade more often than not ends in losses.
Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the “Essence of Swing Trading” eBook by clicking here. At the time of publication, Berger had no positions in the securities mentioned.