I’m not much for fundamentals, but the story these charts are telling is clear. Technical signs identified by my Trending123 Pattern Scan powered by Recognia are pointing to drops ahead for two social media darlings: Facebook (FB) and Zynga (ZNGA).
Downside Breakout in FB
Click to EnlargeFacebook’s price broke downward out of the trading range that began in late March, suggesting we’re entering a new downtrend. The downside breakout pattern represents a trading range in which prices move sideways between two parallel horizontal lines. It’s often a pause or congestion area within an existing trend, though sometimes the breakout results in a reversal to the prior trend. Either way, a downside breakout through the lower support line signals an end to the consolidation period and the start of a downtrend.
Recommendation: Short FB for a $20.90 – $21.70 target.
Diamond Top in ZNGA
Click to EnlargeThe price seems to have reached a top, showing signs of reversal as it has broken downward after a period of uncertainty or consolidation. The diamond top pattern begins during an uptrend as prices create higher highs and lower lows in a broadening pattern. Then the trading range gradually narrows after the highs peak and the lows start trending upward. When the price breaks downward out of the diamond’s boundary lines, as it just did Friday and today, it marks a significant reversal to a new downtrend.
Recommendation: Short ZNGA for a $2.75 – $2.85 target.
InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the Open, Parabolic Options and Trending123. Trending123 members receive access to the Trending123 Pattern Scan powered by Recognia free as part of their membership. For more information on which service is for you click here.