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Key Levels for Facebook Stock in Second Half of 2018

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Social media giant Facebook, Inc. (FB) is solidly in bull market territory, up 29.3% since trading as low as $149.02 on March 26. Before this trend formed, the stock began 2018 with extreme volatility. Facebook began the year at $176.46 and then traded as high as $195.32 on Feb 1, then suffered a decline of 5.2% to its Feb. 9 low of $167.18, which held its 200-day simple moving average, then at $168.79. The stock then rebounded 11.3% to $186.10 on March 12 before tumbling by a bear market 20% to its 2018 low of $149.02 on March 26. This slump was caused by the March 19 news that Facebook unethically allowed customer data to be used by Cambridge Analytica. 

On April 25, Facebook reported much better-than-expected earnings showing that the scandal had limited effect on the bottom line. This was the fundamental fuel for the bull market run that may have peaked on June 20 with the all-time intraday high of $203.55. Facebook shares closed Tuesday at $192.73, up 9.2% year to date and 5.3% below the high. (See also: Facebook Shares Move Lower as Data Breach Probe Broadens.)

The daily chart for Facebook

Daily technical chart showing the performance of Facebook, Inc. (FB) stockCourtesy of MetaStock Xenith

Facebook is well above the lowest horizontal at $162.65, which is my annual pivot. This key level was a magnet between March 20 and April 24, with the Cambridge Analytica scandal low and the positive earnings on April 25. Weakness to the annual value level was thus a buying opportunity. On Monday, Facebook announced yet another software bug, and the stock began to slump. The center horizontal line is my July value level of $182.40. At the top of the chart are my new semiannual and quarterly risky levels of $202.46 and $203.97, which makes it difficult to predict a new high in the second half of the year.

[If you’re interested in learning more about stock chart analysis, the Technical Analysis course on the Investopedia Academy includes interactive content and real-world examples that can enhance your trading skills.]

The weekly chart for Facebook

Weekly  technical chart showing the performance of Facebook, Inc. (FB) stockCourtesy of MetaStock Xenith

The weekly chart for Facebook is positive buy overbought, with the stock above its five-week modified moving average of $190.32. The stock is well above its 200-week simple moving average  at $125.34, which is the “reversion to the mean” that has never been tested for shares of Facebook. The 12 x 3 x 3 weekly slow stochastic reading is projected to slip to 88.30 down from 90.06, losing its “inflating parabolic bubble” image. The stock remains well above the overbought threshold of 80.00.

Investors should buy Facebook shares on weakness to my monthly and annual value levels of $182.40 and $162.65, respectively, and reduce holdings on strength to my semiannual and quarterly risky levels of $202.46 and $203.97, respectively. (For more, see: 12 Stocks That Can Lead in a Rocky Second Half.)

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April 8, 2019

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