Is Facebook Finally Becoming A Buy Now?
Arnout Ter Schure | Dec 04, 2016 02:29PM ET
For those who follow us, we already warned early August, see here, to not chase Facebook (NASDAQ:FB) at those lofty levels. It was then trading at $124. Now it's trading at $115. All the 8% gains you may have had since have now turned into a 7% loss if no prudent trailing or stoplosses were set... That's the power of foresight based on objective factual technical analysis of the price charts using several techniques that combined become a very powerful and succesfull tool.
Last month, see here, we then suggested the Facebook bulls had a good chance left with a first good price target at ~$110. With FB now trading at $115 it is getting close and it is time to re-assess the charts to see if it is becoming a good buy. Below is the weekly chart of FB and we see a good support zone at $115-$110 (green rectangle). If that doesn't hold then the lower dotted black up trend line at around $105 is very good support. In addition, we provide an alternate Elliot Wave count then the one we've shown before and this alternate count gives the Bulls two more chances. If this count is correct then we expect FB to bottom at the 38.2% retrace level, typical for a 4th wave (red iv). Then price should rally to $140-$145 before the next larger correction ensues.
At this stage, all important technical indicators (our proprietary A.I. and the MACD) are still pointing down on the weekly time frame, but the RSI5 is getting oversold again and may be setting up for positive divergence. In additio, there are no buy signals yet. Once the A.I. turns to a buy it is time to follow and go long.
Bottom line, we expect Facebook to put in an important low in the $115-$105 zone, with an ideal level of $110. We then expect price to rally to $140. Hence, at $110 there's a $5 downside risk and $30 upside potential. A 1:6 risk-reward, which is very good!
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