Yesterday, we placed a bullish call}} on Twitter shares, despite the selloff sparked by the social media company that permanently banned US President Donald Trump from their platform. Today we'll take a look at Facebook (NASDAQ 🙂 which also suspended the president's account last week after his inflammatory comments at a rally on Wednesday sparked a chaotic riot in the Capitol building that led to the deaths of five people .
However, we are bearish on Facebook. In this message {{art-200548794 || We reiterate our expectation that the behemoth's stock will continue to clash on social media, something that's been going on since December 23, two full weeks before angry Trump supporters stormed the Capitol.
At that point, Facebook's already flagging reputation took another blow when the US government officially charged Menlo Park, the California-based tech giant with antitrust violations, adding yet another violation to a list of earlier grievances. entered the company, including manipulation and privacy violations.
But it is the technical forces of supply and demand that are really arguing for more losses in the future.
Recall that the most recent declines occurred along this timeline: January 6, the Capitol was breached; January 7, Facebook indefinitely suspended Trump's account; January 8, FB shares fell.
We created this timeline to show that the stock was already on a downward trajectory before last week's events. The ban and resulting outrage from the president's supporters have only accelerated what was already on the verge of collapse.
Here's our proof: the stock fell to the bottom of a symmetrical triangle in mid-December, the technical significance of which is underscored by the seamless appearance of the 100 DMA. It's so close that you can't even tell them apart until the triangle is complete.
Subsequently, the price attempted to climb back in the pattern on December 28, but was rejected unceremoniously on December 30. At that point, the price started to decline, reaching $ 260 on Jan. 6. 3% below the price of $ 268 that was reached on December 23 when we placed our original bearish call.
Perhaps the bad rap Facebook got before the Trump ban caused its engineers to now deviate from Twitter, whose sell-off we consider nothing more than a buying dip. However, Facebook is under pressure, even if it is already lower.
Stock volume has fallen, in contrast to the rising price between September 21 and November 5 and a symmetrical pattern since August 25. Note that the volume has been reversing to price since 23 November. , falling when the price goes up and up when the price goes down, indicating which direction the money will go.
The On-Balance-Volume indicator predicts the direction of the price. It already fell below the Sept. 21 low, suggesting the price is heading in that direction as well. The indicator registered a second, lower low, identifying a downward trend over the medium term. , then collect the correction and confirm the downtrend with resistance.
Moderate traders would wait for the new low and then the same corrective rise, for a better entry, not necessarily confirmation.
Aggressive traders could go short at will, provided they follow a trading plan that can withstand the whip saws we expect.
Here's an example:
Trading Example – Set Short Position
Entry: $ 265
Stop Loss: $ 280
Risk: $ 15
Goal: $ 220
Reward: $ 45
Risk: Reward Ratio: 1: 3
