What’s to like about Facebook (NASDAQ:FB) these days? More than a couple of things, in fact. But if you’re going to get friendly with shares and purchase FB stock, remember to still look both ways and be respectful of minding gaps up and down.
Let me explain.
After a tumultuous second half to 2018, FB stock is looking like a good bet for higher prices. To be sure, the social media giant’s storied growth of years past may not return anytime soon, or ever for that matter. But should that really be a source of disliking shares of Facebook?
For a strict growth or momentum-style investor, Facebook stock probably isn’t a safe bet and it’s definitely far from being a top pick in that category. Still, for more value-oriented types, Facebook has continued to grow smartly overall despite the bumps in the road.
Most recently, in late January, Facebook beat the Street handily as it delivered record profits for its fourth quarter. The results, of course, were all the more impressive as they occurred in the face of last year’s scandalous fake news drama, security breaches and what has been a more challenging and costly operating environment for FB stock to do business.
Facebook stock will likely never be able to free itself from the trend of protecting users from bad and malicious actors and the associated ramp-up in spending. That’s a secular trend to be sure. However, the good news for investors that like other friendlier trends still happening off and on the price chart is that it’s time to buy into FB today.
FB Stock Daily Chart
Since February, FB stock has been mostly disliked by Wall Street after shares gapped wildly higher on the heels of the company’s well-received earnings beat. But although Facebook’s relative weakness and price action was prone to gap-based profit-taking, it is now set up as a long.
FB’s mostly lateral meandering of the past couple of weeks has turned decidedly bullish. Stochastics has formed a crossover from oversold levels and Monday’s heavier volume breakout above 200-day simple moving average resistance is now signaling that it’s time to go long Facebook.
FB Stock Trade
With the passage of time replacing post-earnings technical concerns and FB stock swinging back into bull territory with supportive technical evidence in tow, the combination is reaffirming a continuation of FB stock’s uptrend.
Facebook still needs to clear its recent highs, which unsuccessfully challenged the 50% retracement level. But I’m optimistic the next test will find Facebook stock easily clearing resistance. And in my view, and as stated above, shares are ready for purchase today without requiring any additional price confirmation.
My initial price target for FB stock is $200 a share. I like the $200 level as it’s a whole number, is roughly mid-way inside of this past summer’s bearish price gap and offers upside of about 20%. Still, in the event that other gaps like January’s earnings-driven reaction appear more likely to get filled first, using a stop below $159 keeps the exposure manageable relative to the reward. And it’s also a technically compelling choice as it considers that other price gap too.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.