Under continued scrutiny by lawmakers but not Wall Street, Facebook (NASDAQ:FB) is once again in position for acquittal and a profitable play for FB stock bulls.
The cryptocurrency markets led by bitcoin and etherium were under siege Tuesday following the U.S. Senate’s critical view of Facebook’s plan to enter the space with its digital currency named Libra in 2020. For their part, OTC-listed Grayscale Etherium Trust (OTCMKTS:ETHE) and the Grayscale Bitcoin Trust (OTCMKTS:GBTC) were slammed 7.25% and 12.75%, respectively.
Tuesday’s fiery political theater on Capitol Hill against FB stock should come as no surprise. U.S. regulators are already investigating whether the social media platform and fellow tech giants Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Apple (NASDAQ:AAPL) have abused their market positions and hindered competition at the expense of consumers.
Facebook’s Libra simply adds more fuel to the fire.
It stands to reason FB stock would be under pressure given the broader market’s mild profit-taking after Trump’s latest tweet stating the trade war isn’t going to be easily resolved spooked Wall Street. But that wasn’t the case.
Despite the perceived risks, investors continue to ignore FB stock’s headline scares. In Tuesday’s session, the indifference added up to a gain of 0.12% in Facebook shares. It’s not a lot. Still, the defiant bid does follow a rally of about 28% since U.S. authorities began grilling FB in June. What’s more, the longer-term Facebook price chart suggests an even larger rally could be close at hand.
FB Stock Monthly Chart
I last discussed FB stock shortly after U.S. regulators’ initial inquiry into the company. A technically favorable price drop on the news which tested 2019’s Fibonacci 50% support level has gone on to carve out gains of around 17% over the last few weeks.
Now and with shares closing in on their all-time-highs, FB stock is offering investors another opportunity to go long shares.
On Facebook’s monthly chart, shares recently broke out of a three-month consolidation within the larger corrective pattern as resistance at $198.48 was overtaken. With shares less than 3% above the trigger price, FB stock is still in position for buying.
Given the duration and depth of Facebook’s year-long and 45% deep cup-like base, an eventual test of Facebook stock’s pattern and all-time-high of $218.62 from last July should lead to a breakout to fresh highs. And based on a rough estimate of the base’s depth, a projected rally toward $300 is possible by next year.
FB Stock Strategy
Buy FB stock today. For managing position risk, the recommendation is to size FB stock with a blended stop-loss beneath $180 for protection. If Facebook breaks out to new highs, taking partial profits in-between $225 – $235 is a good start to reducing exposure as well.
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 and related musings, follow Chris on Twitter @Options_CAT and StockTwits.