Facebook (FB) has been on the mind of investors since its initial public offering (IPO) May 18. A lot of negative press has been heaped on the stock in the wake of its lackluster performance.

As an active day trader, focusing on stocks that gap, FB has made my morning list a few times and I have gotten to know her well.

Facebook saw its initial public offering between $45.00 to $38.00. That price was completely rejected by the Street and it took fourteen trading days for FB to find some support at $25.50 when it formed a nice daily pivot on the chart. After that, FB rallied up to find some price rejection into $33.50 and then made a lower high and tested the pivot of support at $25.50 (Supply Level 2), completely gapping through it smashing any support it had previously built.

FB’s short life span has just entered into a new price discovery and has proceeded to press lower each day searching for buyers. The low of $22.28 has already been tested and rejected twice on August 7 and August 13 and has provided us with a marker of supply (Supply Level 1).

On August 16, gap down day, FB made another marker of supply on the high at $20.48. If FB can push through again to 20.48 and build some price support it will try and test the $22.28 supply area. If it is unable to build any price support down here in the $18.00 – $19.00 area it will likely drift lower until price support is built. FB has a lot of back filling to do to build any long term support.

Be short into “Level 1 Supply” at $22.40 or sell into any break of 18.00 area. Trail until the trend changes. If FB gaps up to “Level 2 Supply” $25.50, sell into that gap up, with a target at $22.40.

Facebook (FB) IPO Bearish Gap

[Editor’s note: What stocks are on your watch list today? Are you ready to short Facebook? Let us know. ]