Shares of social media company Facebook Inc (NASDAQ:FB) rallied Wednesday on the back of positive comments by CEO Mark Zuckerberg regarding the company’s video came strategy, among other things. FB stock has largely been stuck in a trading range since last summer, but now increasingly looks to be building up enough momentum to break higher.
The Mobile World Congress taking place in Barcelona, Spain, has gathered increasing attention in recent years as many of the world’s largest and most influential technology firms like Facebook and Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) update the world on products, services and strategy.
Mark Zuckerberg on Wednesday reiterated that he believes virtual reality will be a part of the future, and also said Facebook could help to build out Internet infrastructure for developing nations.
FB Stock Charts
Looking at the multiyear weekly chart of FB stock, we see that after a steep rally in the second half of 2013 and a continued (albeit slower) push higher into summer 2014, Facebook began to slow down and settle into a bigger-picture consolidation phase. Healthy stocks tend to consolidate in time, and don’t dip too sharply following a nice rally. Facebook is ticking those boxes and ultimately stands a good chance of breaking out of this eight-month consolidation phase to the upside.
Furthermore, note that FB stock broke above its March 2014 highs in late July, and that this consolidation phase has so far has all taken place above those previous highs.
Again, that’s a healthy sign.
On the daily chart, we see that while FB stock is still decidedly stuck in this trading range since last summer, the price action over the past week or so has pushed it toward the upper end of the range. Specifically, the rally on Feb. 9 allowed Facebook to clear a first horizontal resistance area around the $78 level. Wednesday’s 1.63% rally then gave the stock a further bump, leading it to close at a new year-to-date high.
Although volume still leaves something left to be desired, the price action as of late does give FB a better-than-average chance of breaking into the low and mid-$80s over the next few weeks.
Active investors could look to leg into the stock around the $80.60-$81 area for a move toward $84. Any bearish reversal of Wednesday’s rally would negate the near-term trade setup and call for the stock to consolidate some more.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
