Shares of Facebook (NASDAQ:FB) have nosedived in recent weeks, but with the most recent price action in FB stock, there is a promising technical opportunity arising. Specifically, the price section around the $160 mark could indeed lead to a tradeable bounce for active investors and traders.
In order to fully grasp the scope of this opportunity, we must remind ourselves of the importance of understanding time-frames when trading or investing.
Indeed, confusing or mixing time frames is one of the biggest hurdles for traders and investors. For example, a stock may be oversold and ripe for a trading bounce of several days or weeks in the near term, but in the duration of months and quarters, the stock remains severely challenged technically, fundamentally and structurally.
My advice on overcoming this issue is to set a clear time-stop and time-target in addition to price stops and targets on any trades or investments. Of course, setting these and then actually sticking to them is another challenge …but that is a topic for another day.
FB Stock Charts
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Moving on to the charts, we see that on the multi-year weekly view, FB stock traded in an orderly up-trending channel from 2014 into 2017. Since then, however, trading in Facebook has become more volatile.
While the stock still has long-term support around its red 200-week moving average, that area currently resides another 13% lower. As such, from an intermediate-term perspective, Facebook stock is not yet a buy.
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Moving on to the daily charts, we can zoom closer into the aforementioned technical support area, which is a “confluence support area” because it is made up of several technical measurements colliding at the same spot.
FB stock’s recent slide from the April highs earlier this week totaled just about 20%, around the $160 mark. Furthermore, $160 is where the stock’s red 200-day simple moving average currently comes in. Finally, $160 offers horizontal support from earlier this year … and $160 marks an exact 50% retracement of the entire rally from the late 2018 lows into the April highs.
What I like most about this trade setup is that we have a super well-defined stop loss at $160.
A first upside profit target at $175, possibly followed by $180 is what this trade setup speaks to me.
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