Facebook, Inc. operates as a mobile application and Website that enables people to connect, share, discover, and communicate each other on mobile devices and personal computers worldwide. Its solutions also include 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 for mobile and Web on various platforms and devices, which enable people to reach others instantly, as well as enable businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application.
Take a look at the 1-year chart of Facebook (NASDAQ: FB) below with added notations:
Over the past two months, FB has fallen into a sideways trading range. While in the range, the stock has formed a common pattern known as a rectangle. The pattern has formed a resistance at $122.50 (red), and a $114 support (green). At some point the stock will have to break one of the two levels.
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The Tale of the Tape: FB is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $114 or on a breakout above $122.50. The ideal short opportunity would be on a break below $114.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach