Facebook At A Critical Level

Social media giant Facebook Inc (FB) has been one stock that I stayed away from as it was simply too laden with emotions for my liking and involved in a media blizzard.  Now that the company is no longer making front page headline news on a daily basis, has some trading history and has arrived at an interesting technical level on the chart, I am warming up to the idea of swing-trading the stock.

After Facebook Inc (FB) cratered just about 60% in price for the first 3 ½ months of trading, the autumn winds ironically slowly allowed the stock to stabilize.  By the second half of November the stock had established a solid floor around the $18 – $19 area, a higher low versus the summer lows, which set the stock up for better technical behavior through late January 2013.

Just like the late summer 2012 lows act as good support, so does the zone between $32.50 (January 2013 highs) and $33.50 (June 2012 highs) act as meaningful resistance, until broken of course.  This resistance area also formed just north of the 50% retracement line of the entire move from the IPO day high down to the September lows, thus further confirming the area’s significance.

While the January high at $32.50 for now is the level to breach on the upside, nearer-term the stock has found lateral support at the $28 mark, which acted as resistance in December.  We need to see a meaningful reversal day to the upside if the stock wants to bounce here, and should $28 break, the next lower support I would look for would be between $24 and $25.50.   This area also happens to represent a so called confluence zone of support as lateral support coincides with an area between the 50% and 61.80% Fibonacci retracement of the swing higher from the November lows.

The $24 area should hold as final support if the stock wants to eventually try another higher probability run towards and potentially past the late January resistance zone.  Any break below $24 would cancel the bullishness of the late 2012 rally and ask for reevaluation of the chart.

 

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