Traders may have been confused by the way Facebook (NASDAQ 🙂 recovered yesterday from a drastically lower open after being hit with a $ 5 billion fine for privacy abuse.
Of course, the miraculous rebound of the stock came from a three-week low to a two-week high before the beat, which was reported after hours. The jump came as a jerk on the news, which turned out to be positive after investors had time to consider the numbers.
Facebook & # 39; s settlement with the Federal Trade Commission, which is no more than what the social media monster makes every month, was a huge win for the company, whose accountants and lawyers probably expected a bigger hit from what now seems to have had a hasty and superficial FTC investigation. The settlement can indeed evoke goodwill among Facebook users and customers, assuming that Facebook has paid for its mistakes and will not repeat them. All in all a very good deal for the media giant.
When investors learned and distributed the probe's outcome, which had caused a tough headwind in the past year, yesterday's business results after the market should now lead to a sustainable rally. Facebook reported earnings per share of $ 1.99 and sales of $ 16.95 billion, surpassing the expected $ 1.87 earnings per share and $ 16.5 billion.
The graph shows that the balance between supply and demand has reduced the scale in favor of bulls, ending a stalemate between buyers and sellers.
The price has risen since it opened higher on July 10. The rising gap offered support. The congestion had a downward bias – which formed a falling flag, considered bullish in an upward trend – as buyers steadily absorbed all offerings from earlier bulls from June 4. Halfway through, some buyers took earlier profits and formed a pennant-like follow-up pattern June 18-28.
Yesterday's end completed the pattern after breaking to the top, showing that after all sales, buyers were still not saturated and wanted more, which led them to increase bids to find new willing sellers. The strong profit after the market pushed prices even higher after office hours. The current pre-market quote is $ 206.68, 1% higher than the closing price, marked by the green line, further deepening the breakthrough.
The Facebook settlement created a major headwind, paving the way for investors to retest July 25, $ 218.62 all-time high, with the implicit target of the bullish flag putting it in a hop, skip and a jump changed.
Trading strategies – setting up long positions
Conservative traders are likely to wait for a 3 percent penetration above $ 210, and then wait for a possible withdrawal that shows support.
Moderate traders can be satisfied with only a 2% outbreak to $ 208 to filter out a bear trap, then they can wait for a return movement to limit exposure, not necessarily for confirmation.
Aggressive traders can go long with a closing of more than $ 206, waiting for a 1% filter. They could then wait for a downward movement to retest the pattern – with at least one long green candle engulfing a red or small candle of both colors – or for a closer stop loss.
Trade sample
Admission: $ 205
Stop loss: $ 203
Risk: $ 2
Target: $ 211
Reward: $ 6
Risk-reward ratio: 1: 3
