Facebook Inc: Don’t Even THINK About Selling FB Here!

Advertisement

fb - Facebook Inc: Don’t Even THINK About Selling FB Here!

Source: The Crunchies! via Flickr

Facebook Inc (NASDAQ:FB) bulls took something of an overdue beating to end last week, but it’s too soon to call for profit-taking in Facebook stock.

fb facebook stockNo stock operates in a vacuum. FB didn’t sell off because of company-specific news. Nothing new happened to make Facebook worth many billions of dollars less. Pretty much every name took a hit last week.

News flash: This is what markets do in September.

The month following the end of summer has long been known to the worst time of the year for the stock market. Go all the way back to 1928, and you’ll see that the S&P 500 loses an average of 1.1% this month, according to Yardeni Research. No other month comes close to that kind of drubbing.

Every market participant knows that the end of the third quarter brings increased volatility and itchier trigger fingers. Sell first and ask questions later is the order of the day.

Bears are rejoicing that the market had its toughest day since the Brexit vote, but they shouldn’t get too comfortable. After all, the decline was attributed to jitters over monetary policy in the U.S. and abroad.

Stop us if you’ve heard this one before.

Plus, if you jump out of Facebook stock now, you’re backing away just as the company unleashes yet another way to monetize its ludicrous reach.

FB Stock Is Not in Trouble

Facebook stock was on the rebound Monday, in part thanks to the lift from the broader market, and in part as it announced that its Messenger application is introducing long-rumored payment capabilities.

From Reuters:

“David Marcus, VP of messaging products at Facebook, said at the TechCrunch Disrupt conference that the company was working with a number of payment providers including PayPal, Visa, Mastercard, American Express and Stripe to implement the features.”

Besides, Facebook has hardly collapsed since the market went wobbly. Facebook stock is only off about 3% since Wednesday’s close. That’s no fun, but it’s far from scary. Especially when you consider the context that FB fell from an all-time high. Heck, the stock was up 25% for the year-to-date at last week’s peak. (It’s still ahead 22% for the YTD.) Furthermore, it was overbought on the relative strength indicator.

When the market fumbles, you expect to see a stock with such attributes underperform the S&P 500. That’s what they do. It’s a cliche but it’s true — the higher they fly … blah, blah, blah. The algo-bots and traders sold FB stock because they could do so both easily and profitably. The thinking, at least in part, is “what do we have that’s both super liquid and up?”

Let’s not forget that every transaction has a seller AND a buyer. Sure, market makers can take up some of the sales but plenty of investors were happy to buy FB stock at a slightly discounted price.

FBWhich brings us to the technicals. The immediate fear is that Facebook stock is signaling a reversal pattern. But if that’s true, where’s the follow-through? FB stock fell fractionally at the open, but as we mentioned, that’s all gone now.

Note that the broader market failed to follow through with Friday’s dump, too.

Facebook remains well above both its 50- and 200-day moving averages. It rarely violates the 50-day MA, and when it does, it’s usually not for very long. The 200-day MA is nowhere in sight.

And just for good measure, FB stock is also comfortably above the very short term 20-day moving average. It’s also back to neutral on the relative strength indicator.

Monday’s failure to follow through on what is essentially old news (rate hikes, again?) doesn’t give the broader market or FB stock a clean bill of health. No single session can do that. But it does make the technical picture much more reassuring.

Bottom Line

If you’re looking to churn your portfolio and rack up fees this month, by all means trade every market hiccup. Just remember that stocks never move in a straight line and September won’t last forever.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2016/09/facebook-inc-fb-stock-dont-sell/.

©2024 InvestorPlace Media, LLC