Shares of Facebook Inc (NASDAQ:FB) rallied 1.7% on Thursday, January 5, taking the year-to-date rally up to nearly 5%. While just three trading days don’t yet make a new trend, the price action on Facebook stock does look encouraging thus far. From a reward-to-risk perspective, traders would be wise to look at FB stock once again from the long side, keeping a close eye on a specific catalyst on the calendar.
For some perspective, when I last chimed in on FB stock on Dec. 14th, I offered that the stock remained in a well-defined, bigger picture up-trend, but the relative weakness versus the Technology SPDR (ETF) (NYSEARCA:XLK) had to improve for Facebook stock to once again offer better buying opportunities.
The company is scheduled to report earnings on Feb 1., which will likely be the next big toggle date for FB stock as well.
In other words, active investors would be wise to tread somewhat carefully around Facebook stock until the next earnings report, which has the potential to make or break the multi-year up-trend that the stock has so nicely carved out.
On Dec. 14, I showed a relative or ‘ratio chart’ pinning FB stock versus the XLK exchange-traded fund. At the time, the relative weakness of Facebook stock was painful to watch and while the stock is not out of the woods just yet, the year-to-date and week-to-date rally is improving the picture both in absolute and relative terms.
FB Stock Charts
On the multi-year weekly chart we see that the multi-year up-trending channel remains intact and that the yellow 50-week simple moving average, which roughly equates the 200-day moving average still coincides with the lower end of the channel as support.
From this angle, a meaningful weekly close below this moving average and below the lower trend line could likely see FB stock tumble closer to its blue 100-week moving average as next support. However, support is not broken until it is, which is another way to say that the trend remains our friend until it ends.