Bullish and Bearish Investors Both Have Fair Theses on Facebook Stock

Investors can feel confident buying Facebook stock, but they’re not alone

You can like or dislike Facebook (NASDAQ:FB) as a social media platform. Still, when it comes to buying or selling Facebook stock, bulls and bears have stronger reasons on the price chart to remain unbiased, but ready for action. Let me explain.

FB Stock Drops on Report of DOJ Antitrust Probe
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You love the lost friends you’ve reunited with on Facebook. Or perhaps you’re a vicarious explorer and are hooked on the company’s Instagram app. To be sure, lives have been changed for the better because of Facebook’s technology and social media platforms. Go Facebook stock. Right?

Alternatively, maybe you see Facebook’s prior privacy breaches as unforgivable? How about fake news? Or possibly comedian Sacha Baron Cohen’s recent and viral vitriol against Facebook during an Anti-Defamation League awards speech are reasons you shake your head in disdain at the technology giant? Facebook is evil. Right?

My view is simply to each their own on liking or disliking Facebook. I admittedly straddle the fence. And right now, whether you’re like me, agreeable or enraged by the company’s role in today’s society, as a bullish buy or bearish short, investors should be neutral and only supportive of Facebook stock’s price chart.

Facebook Stock Price Bullish Weekly Chart

Source: Charts by <a href="www.tradingview.com" target="_blank" rel="noopener noreferrer">TradingView</a>

Facebook stock has put in a lot of constructive work. Over the past 17 months, FB has carved out a corrective cup of around one year in duration. More recently the bullish pattern has been reaffirmed by a slightly flawed, tighter handle consolidation within the right side of the larger base.

For investors keen to exploit this mostly bullish price pattern, purchase FB stock on a breakout of the irregular handle. Because of how long it took to build this pattern and the deepness of the consolidation, a momentum-style approach is necessary. This might seem counter-intuitive. But it’s a much stronger strategy than buying shares today within the handle and simply hoping for the best.

If a breakout occurs, a conservative measured move out of the cup base could lead Facebook stock towards $300-$320. To capitalize on that potential while reducing downside exposure and still respecting market volatility, I’d recommend an initial stop loss of 10%-12%.

Facebook Stock Price Bearish Weekly Chart

Source: Charts by <a href="www.tradingview.com" target="_blank" rel="noopener noreferrer">TradingView</a>

For investors that see Facebook and others like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) or Amazon (NASDAQ:AMZN) as enemies of the people, support for the bear case also exists. This same weekly view shows ample signs of pending weakness in the FB stock price. That’s just from simply tweaking the perspective.

There’s growing evidence that Facebook stock is topping out. I discussed as much in a recent InvestorPlace article on FANG stocks.

I’m revising my prior short strategy to reflect this week’s rally. I’d continue to use $201.50 as the line in the sand for bears. If shares climb above this level all bearish bets are off the table. But for initiating a short position, the gain in the FB stock price this week means bears can effectively fade the rally at potentially a more favorable price. This entry could arrive as soon as next Monday if  a weekly topping candle pattern is confirmed.

If an adverse move in shares occurs after opening up a short position, the aforementioned $201.50 contains and minimize losses to a reasonable amount. However, should Facebook stock oblige bears in the coming weeks, an initial price target of $175 for taking profits continues to look good — and possibly even more attractive in relation to the entry.

Investment accounts under Christopher Tyler’s management do not currently own positions in 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 market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2019/11/facebook-stock-bulls-bears-short-fb/.

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