Although the price of Facebook (FB) stock isn’t jarringly different than it was about a month ago, it hasn’t been for a lack of movement. Since my last update on FB stock (Dec. 5), shares proceeded to rally more than 20% in about two-and-a-half weeks; however, since then, momentum has begun to wane as indicated by various momentum oscillators.
Before looking at the charts, I would be remiss not to point out Facebook’s recent $15 million acquisition announcement of link-sharing platform Branch Media. FB continues to buy up small companies to complete areas on the Facebook site that see significant user growth.
On the research front, plenty of FB stock analysts remain critical of Facebook’s business model, while others — some of whom simply want to stir up the headlines — are ridiculously bullish on the stock’s growth prospects.
For me, rather than getting overly bulled or beared up about Facebook, I prefer to focus on the price action to tell me what side of the market to trade … and to that end, FB stock has done a good job giving us valid signals during the past 12 months.
On the chart, note the early- to mid-December rally in FB stock, which then quickly began to consolidate sideways on slowing momentum — see the Stochastic indicator on the lower part of the chart as it flashes divergence.
During the past few weeks, FB stock has consolidated in a fairly tight pattern, the lower end of which was once again tested with Monday’s 3.5% selloff (see blue arrow on the chart below).
From here, until FB stock breaks below $55.50 or back above $58.50, I see little to do with Facebook. My upside and downside targets, should one of the aforementioned levels break, are $62 on the upside and $51 on the downside, for the time frame of a handful of weeks.
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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 e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.