Facebook: FB Stock Could Perk Up Even More Before Earnings

by Serge Berger | April 10, 2014 8:24 am

After diving 23% from its all time highs, Facebook (FB[1]) stock has shown a bit of fight this week. With Facebook earnings now two weeks away, analysts are busy publishing their predictions, and for the most part remain positive on FB stock.

facebook-fb-stock-charts[2]For instance, SunTrust reiterated a “buy” rating on FB stock[3], as well as a $70 price target. Meanwhile, Susquehanna kept Facebook shares at a “positive” rating[4], though it did lower its price target from $72 to $69. Susquehanna is positive that FB will beat the first quarter analyst estimates.

Additionally, Gene Munster, the famed technology analyst from Piper Jaffray, said his survey found Facebook’s Instagram is the most important social network for teens[5].

One last headline from yesterday: COO Sheryl Sandberg confirmed with CNBC that she has no plans to leave the company, nor any political ambitions of which to speak.

All of this, including the much oversold readings that the stock had fallen too, allowed FB stock to rally 7.25% on Wednesday, just about erasing the nasty selloff from last Thursday and Friday.

From a pure price action point of view, Wednesday’s rally in stocks was led by the Nasdaq, where the most oversold groups like biotechnology and social media saw some of the sharpest bounces. So, the rally in FB stock wasn’t entirely due to idiosyncratic manners, but also a function of a lift in its industry group.

FB Stock Charts

On the chart, after dipping below its summer 2013 uptrend as well as the 100-day simple moving average (blue) last Friday, FB stock’s rally thus far this week has brought it right back up for a retest of the underbelly of the black up-trend line. While this could offer some resistance in the immediate term, a better upside resistance area is at the 50 day simple moving average (yellow), currently near $65.30, or about 5% above Wednesday’s closing price.

Click to Enlarge

So, active investors and traders might find some more upside still in FB stock heading into Facebook earnings, particularly if the musings from the analyst community remains upbeat.

To be clear, I am no advocate of not holding stocks through their respective earnings announcements. As such in terms of FB stock, while I see some further upside potential before earnings, I personally have no plans of holding Facebook shares through the announcement, as the uncertainty of the outcome is simply not a winning long-term strategy.

The strategy that has served me well over the years for stocks that might be pushed higher into an earnings announcement — particularly if they bounce from oversold levels — is to get out of the stock around two days prior to the announcement.

A next trade in the stock might well set up once earnings have passed, but we will cross that bridge when we get there.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here[7]. As of this writing, he did not hold a position in any of the aforementioned securities.

  1. FB: http://studio-5.financialcontent.com/investplace/quote?Symbol=FB
  2. [Image]: https://investorplace.com/hot-topics/beat-the-bell
  3. SunTrust reiterated a “buy” rating on FB stock: http://www.cnbc.com/id/101570515
  4. Susquehanna kept Facebook shares at a “positive” rating: http://news.yahoo.com/market-wrap-april-9-investors-203539250.html
  5. Facebook’s Instagram is the most important social network for teens: http://finance.yahoo.com/news/munster-says-facebooks-instagram-most-131230630.html
  6. Beat the Bell: https://order.investorplace.com/?sid=FQ8104
  7. Essence of Swing Trading e-book here: http://www2.marketfy.com/l/15492/2013-07-23/55sww

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