Facebook Inc (NASDAQ:FB) shares immediately dropped after their early November earnings report, and they continued to act weak all the way up to yesterday. However, on Thursday, FB stock finally showed signs of exhaustion selling as it fell into a major technical support zone, then quickly bounced.
Active investors and traders now have clearly defined technical support to lean against on the long side of Facebook stock.
Shares of large-cap tech stocks such as FB, Alphabet Inc (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN) played a crucial role in holding up the broader U.S. stock market throughout the summer and right into late October. Their very real and believable growth stories were — and continue to be — a save haven of sorts in a world that lacks any real economic growth.
In fact, as I continue to reiterate, corporate top and bottom lines, as well as economic data, continue to slow down. In relative terms, that’s but one reason to continue looking at buying dips in the aforementioned tickers.
However, like any stock or asset class, what goes up ultimately must go down, or at least consolidate. As such, the recent two-week pause in the ascent of FB stock was a welcome respite. That’s because it allowed Facebook to reset, which ultimately leads to higher-probability buying opportunities.
FB Stock Charts
On the multiyear weekly chart, we see that Facebook’s ascent since 2013 has been notably orderly. It also has mostly taken place in a well-defined upward-sloping channel.
Each time FB stock rallied to the upper end of this channel, it was a better sell — just like it was a better buy at the lower end of the channel.
On Thursday, Facebook stock revisited the lower end of this channel, for the first time since late June and is now offering us a better buying opportunity again, all else being equal.
When I last offered my thoughts on shares of Facebook on Nov. 1 — the day before the company’s earnings announcement — I offered that FB stock would be a best buy again near its red 200-day simple moving average. This moving average also coincides with the multiyear uptrend line.
Yesterday, Facebook shares finally reached this area again, and they closed well off the daily lows. In other words, sellers who tried to push FB stock below this confluence support area quickly got denied. They ran out of steam, and the buyers took control.
Facebook stock now offers buyers good risk/reward proposition to buy against the Thursday intraday lows around $115 as a last-resort stop-loss.
Upside targets through a multiweek/multimonth lens are back at the upper end of the channel (i.e., around the mid-$130s).
Option players could also consider selling out-of-the-money put spreads on FB stock as an alternative or in addition to buying the stock.
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