Facebook, Inc. (NASDAQ:FB) remains a solid, but not spectacular, buy

Facebook, Inc. (NASDAQ:FB) remains a solid, but not spectacular, buy

Facebook, Inc. (NASDAQ:FB) remains a solid, but not spectacular, buy

Facebook (FB) carved out a bit of history last week in the aftermath of its after-hours second quarter earnings report (25 July). By Friday’s close, markets had scythed an estimated $120 billion in market value, sending the stock plummeting to the threshold of bear territory with a 20% loss from Wednesday’s close.

The company’s market losses for the two-day period fell within the range of the total GDP output of Ukraine ($127.1 billion) and Morocco ($119.5 billion) through the end of 2017.

Keep in mind, though, when Facebook (FB) stock was recently trading around 172, its trailing P-E ratio was 24. Its forward P-E, using the fiscal 2018 earnings-per-share estimate, was also 24. This may not seem an excessive valuation by any means. But it’s still selling at a premium considering that growth rates are slowing. Full-year earnings are seen rising 18% this year and 16% in 2019.

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

The projected upper bound is: 195.40.

The projected lower bound is: 157.04.

The projected closing price is: 176.22.

Candlesticks

A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 31 white candles and 19 black candles for a net of 12 white candles.

An engulfing bullish line occurred (where a white candle’s real body completely contains the previous black candle’s real body). The engulfing bullish pattern is bullish during a downtrend (which appears to be the case with FACEBOOK INC A). It then signifies that the momentum may be shifting from the bears to the bulls.

If the engulfing bullish pattern occurs during an uptrend, it may be a last engulfing top which indicates a top. The test to see if this is the case is if the next candle closes below the top of the current (white) candle’s real body.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 26.4810. This is not an overbought or oversold reading. The last signal was a buy 0 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 34.74. This is not a topping or bottoming area. However, the RSI just crossed above 30 from a bottoming formation. This is a bullish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 0 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -75. This is not a topping or bottoming area. The last signal was a buy 1 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 5 period(s) ago.

Rex Takasugi – TD Profile

FACEBOOK INC A closed up 4.720 at 176.370. Volume was 19% above average (neutral) and Bollinger Bands were 154% wider than normal.

Open High Low Close Volume___
170.680 176.790 170.270 176.370 32,399,954

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 189.58 195.42 181.55
Volatility: 126 62 44
Volume: 52,799,144 24,146,748 25,596,890

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FACEBOOK INC A is currently 2.9% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of FB.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on FB.O and have had this outlook for the last 4 periods.

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