Facebook: New Intermediate Term Target Courtesy of Expectations

By Andrew Nyquist  OCT 08, 2012 12:40 PM

At some point, what we know and expect starts to get priced into a stock, allowing "new" revelations or dramatically worse or better than expected news to lead the way.


For the past two plus months, Facebook (NASDAQ:FB) has been range-bound between $18 and $23, attempting to carve out and form a rounded bottoming pattern. The pattern has given Facebook stockholders tenuous hopes that higher prices may be in the intermediate term future.
But everywhere investors turn, they are told about Facebook’s dramatic downside, its inability to monetize mobile ads, and the additional stock soon to be dumped on the market. And to make matters worse, there’s a little thing called valuation that analysts and investors are hung up on, and concerned about.

But at some point, what we know and expect starts to get priced into a stock, allowing “new” revelations or dramatically worse or better than expected news to lead the way.
Now that may sound fine and dandy, and even a bit bullish. But as of right now, I do not have a position in the stock. And more precisely, if and only if the stock follows the bottom patterning outlined below, will I entertain going long for a swing trade. It’s gotten pretty negative out there and the stock has some clear levels to buy into (and set stops against).
So where are these levels? Well, the stock has symmetrical and lateral support around $20 and stronger Fibonacci support at $19. Both of these levels offer pretty good risk-reward for an “average-in” position on a swing trade (with a stop below $19 depending upon personal risk profile). An initial intermediate term target would be the open gap between $24 and $26.
All of this is just speculation as of right now, so stay tuned to the price action. And remember to always trade safe and stay disciplined.

Editor's Note: Andrew Nyquist is an independent investor based in the Minneapolis area. This article originally appeared on his investing and economics site, See It Market.

Twitter: @andrewnyquist
No positions in stocks mentioned.

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