The well-known American online social media and social networking service company. It is based in Menlo Park, California, Facebook, Inc. Common Stock (NASDAQ: FB) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock had recently broken out of a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as purple color lines. The breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.
Daily Chart – FB
#2 IH&S Breakout: As you can see from the daily chart, the stock has currently broken out of an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and a breakout from this pattern indicates that the stock may move higher in the short term.
This usually implies a possible bullish bias for the stock.
#4 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 Bullish Aroon: The Aroon indicator denotes bullishness, as the value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart.
#6 Fibonacci Level Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again.
FB had taken support at the 38.2% Fibonacci support level of the upmove, as seen from the weekly chart. This looks like a good area for bounce-back.
Weekly Chart – FB
#7 MACD above Signal Line: In the weekly chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
#8 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of Facebook at the current price of $173.37.
TP: Our target prices are $180 and $190 in the next 3-6 months.
SL: To limit risk, place a stop loss at $169.00. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 4% to 10% in the next 3-6 months. For a risk of $4.37, the target rewards are $6.63 and $16.63. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
Tara