How To Trade FB – 11 February 2017

“The biggest risk is not taking any risk… In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” 

Mark Zuckerberg

FB is what’s known in technical circles as a beast.  

And the products (identified in the description below) “ain’t half bad” either apparently.

As the cover chart for this post shows, over the past 4+ years the stock has run from the mid teens to the current mid 130s almost in a straight line (from a quarterly perspective at least).

The question after this kind of run (right after why didn’t I buy it “down there” and/or why did I sell $80 ago) is how to trade FB now?

There is no 1 size fits all answer, but we’ll take a shot at a couple of options below.

But first, a bit of info…

Company Description

(via Yahoo Finance)  Facebook, Inc. provides various products to connect and share through mobile devices, personal computers, and other surfaces worldwide. Its solutions include Facebook Website and mobile application that enables people to connect, share, discover, and communicate each other on mobile devices and personal computers; Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application to communicate with people and businesses across platforms and devices; and WhatsApp Messenger, a mobile messaging application. The company also offers Oculus virtual reality technology and content platform, which allow people to enter an immersive and interactive environment to play games, consume content, and connect with others. As of December 31, 2016, it had approximately 1.23 billion daily active users. Facebook, Inc. was founded in 2004 and is headquartered in Menlo Park, California.

 

Recent Headlines:

  1. Facebook agrees to independent advertising audit after miscalculations

  2. Short Sellers Raise the Stakes in Social Media Stocks

  3. Snapchat CEO’s fiancee: I cannot stand Facebook

 

How To Trade FB — The Numbers:

Stock Symbol: FB
Snapshot Date: 2/11/2017
Market Capitalization: $387,951,159,921.00
52 Week High: $ $135.49
52 Week Low: $ $100.24
Current Price: $134.19
Yesterday’s Closing Price $134.14
Change (relative to yday close) $0.05
% Change (relative to yday close) 0.04%
Current Price % 52wk Range 96.31%
Most Recent Daily Open $134.10
Most Recent Daily High $134.94
Most Recent Daily Low $133.68
Earnings/Share (Most recent report) $3.47
PE (Price Earnings Ratio) 38.63
Beta 0.68

 

How To Trade FB — The Charts

Monthly — The monthly shows the recent new highs are no fluke.  The stock ripped out of the $112 to $116 level and has barely looked back since then.

How To Trade FB

Weekly 1 – The long term weekly reflects the strength exhibited by buyers on every pullback including the work that was repeatedly done between $112 and $116.

How To Trade FB

Weekly 2 – A tighter weekly view shows the beauty of this Triangle Pattern and why getting short still looks like a bad idea.

How To Trade FB

Daily 1 — Daily charts always destroy the relatively clean looking moves on higher timeframes and FB is no different.  The overall direction is clearly higher, but the stock has presented plenty of opportunities for astute traders to climb aboard.

Daily 2 — The triple test of the rising trendline between mid November and late December offered a great low risk entry for those not already long.

How To Trade FB

 

Daily 3 — The Bull Flag that completed in late January offered the most recent long entry possibility.

How To Trade FB

 

TAOST How To Trade FB Summary: 

FB is a Hold in our opinion… That means if you own it, stay with it.  Perhaps you can tighten your stops up behind you to just under $129.

Sell Outright (close long(s))?

We wouldn’t sell the stock outright at these levels because “prediction is futile” and there’s no way to know for sure if we have achieved a top in the stock.  In order to capture the big runs in any security, one must be willing to endure reasonable pullbacks wherein a security digests a new price level.

Sell Short?

Since we wouldn’t sell the stock outright, we certainly wouldn’t sell it short… and not just because we think shorting individual stocks is a bad idea for the average retail trader.  There’s simply no reason to try to call a top in a strongly trending security… More often than not it just leads to pain and losses.

Buy Right Here?

Finally, we wouldn’t initiate new longs at these levels because price is extended and the price action suggests we will see, at a minimum, a pullback in the not too distant future.  If we get that pullback, we would look for good long entry price action in the $123 to $126 area.  Below $122, we would head to the sidelines and wait for the structure to become more conducive to entering/holding longs.

Hope it helps…

 

KIS,

The Trader

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