Facebook Inc: Will FB Stock Run to New All-Time Highs?

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Facebook Inc (NASDAQ:FB) shares have continued to consolidate their rally from the first seven months of the year in a constructive manner that should ultimately resolve higher.

Facebook Inc: Will FB Stock Set New All-Time Highs?My advice to active investors: Take a bullish posture in FB stock in a bet to see a rally into year’s end.

On Sept. 22, I opined that FB stock was overbought in the near-term and that investors and traders would be wise not to chase the stock higher at those levels. Over the ensuing six trading sessions, Facebook then proceeded to drop about 10% and also hit the price area in the mid-$80s that I discussed active investors looking to play short the stock could target.

Facebook shares have since rebounded again, but it’s looking less stretched here. In fact, it’s continuing to build a solid-looking base that feels like it should push FB stock to new all-time highs.

FB Stock Charts

The multiyear chart of FB stock since its initial public offering in 2012 has not changed since my last piece in September, as the stock remains confined in the wedge pattern.

To be fair to both sides, I will point out that this pattern could also lead to a bearish development should Facebook shares drop and hold below the mid-$80s and accelerate to the downside. For the time being, however, I am willing to give the stock the benefit of the doubt for two reasons:

  • Facebook remains a believable growth story in a global economy with decelerating growth
  • Fourth-quarter performance chasing by fund managers could see them flock to stocks that have shown relative strength all year. That would include FB stock.

fb stock chart weekly
Click to Enlarge

Moving over to the daily chart, note that the entire price action since July has formed a clear line of resistance (black) — a line that FB stock continues to bump into. By definition, the more a stock bumps into support/resistance, the better the likelihood of a more powerful break through support/resistance.

Also note that the August low led to a quick and sharp bullish reversal (i.e., a rejection of those lows) and the late-September low formed a higher low versus those August lows.

FB stock chart daily
Click to Enlarge

Facebook is scheduled to report earnings on Nov. 4, and this could very well be a make-or-break date for this trade. Active investors could look to initiate small to moderate long positions in FB stock around current levels and reduce into earnings so as to hedge any potential post-earnings selloff.

The net upside target for FB stock is $100.

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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.

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