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Chart of the Day: Facebook -- Like, Poke, or Unfriend?


Looking at Facebook's recent large volume days is informative.

Facebook (NASDAQ:FB) has had a rapid fall from grace relative to just a few weeks ago. In late January, the stock was being touted as the comeback kid, leading the social media space higher after being left for dead just a few months ago. But ever since its earnings report, the stock has lost its luster, despite a broad, impressive rally among its social media peers, most notably LinkedIn (NYSE:LNKD), but including other previous doormats like Groupon (NASDAQ:GRPN) and Zynga (NASDAQ:ZNGA).

Here's the lifetime chart:

Click to enlarge

I've drawn the line at $25, which initially acted as support back in June 2012, then was resistance during Facebook's summer and fall 2012 doldrums, and again acted as support in December 2012. If FB does get back near the $25 level, I would view it as a great risk/reward long entry. In the meantime, what's the most likely next direction for FB?

Looking at recent large volume days is informative. Here is the FB chart, this time including volume by day on the lower panel:

Click to enlarge

There were two kickoff volume days (circled in green) before FB finally broke out above the $25. The first was its earnings in October 2012, when the stock gapped up only to be sold down as traders were nervous about the upcoming November lockup expiry. But the second large volume day was indeed the end of the November lockup, when the stock closed more than 10% higher as all those waiting to buy finally pulled the trigger.

In the past month, FB stock has seen two standout volume days again, but this time the resolution was lower prices. The first large volume day was on the Social Graph announcement, which was a buy-the-rumor/sell-the-news event. The second large volume day was after FB earnings, when the stock ended up close to unchanged, but only after battling from -8% to start the day. I've circled those two instances in red because I view them as two kickoff volume days ahead of the recent downside move.

At this point, I think Facebook will have a hard time overcoming the $30 level on the upside, where a good chunk of that kickoff volume traded. Against that, $25 is obvious support, and $26.61 is where the stock closed 2012, so fund managers have that as their year-to-date bogey. With the stock in the middle of major support and resistance, no man's land is the right characterization for the stock right here.

This item by Enis Taner was originally published on

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