From a technical standpoint, Facebook’s (FB) stock has a few things going for it.
First, we have short-term, relative strength. While all the other high-beta tech stocks were seeing aggressive selling Tuesday morning, FB failed to break underneath its most recent pivot lows.
Second, we have intermediate-term, relative strength. If you look at other well-known tech stocks, it seems that AAPL, BIDU and FB are the only ones currently above their major moving averages. Other story stocks, such as GPRO, TSLA, TWTR, YELP, and AMZN have all seen significant trend deterioration.
Third, the stock has seen volatility compression. This simply means it’s been in a tight range over the past month or so, and offers clear risk levels that will show you if the bullish thesis is wrong.
Finally, this pattern is called a “magnet trade.” This means there is an obvious level that will act as a magnet as price will auction up to that level to see if it will get rejected again.
- A good strategy is to take a position before that level is hit, and scale out of it as the magnet trade is fulfilled.
Eighty (80) is the magnet level on FB. That’s the 52-week high level that was lost after the stock gapped down on earnings. FB will most likely trade up to that gap-fill level to see if there are willing sellers there again.
The bullish thesis is invalidated if FB goes under 74.24. This is just under the most recent pivot levels.
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