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Chart Of The Day: Why It’s Time to Sell Facebook’s Stock

By Investing.com (Pinchas Cohen/Investing.com)Stock MarketsOct 12, 2021 09:27
ca.investing.com/analysis/chart-of-the-day-why-its-time-to-sell-facebooks-stock-200490303
Chart Of The Day: Why It’s Time to Sell Facebook’s Stock
By Investing.com (Pinchas Cohen/Investing.com)   |  Oct 12, 2021 09:27
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Facebook (NASDAQ:FB) is undergoing a public relations nightmare. Last week, the tech giant suffered its longest outage in years, leaving its almost 3.5 billion users unable to log on to Facebook, WhatsApp, and Instagram for nearly six hours.

What is worse is that the crash followed a whistleblower leaking thousands of documents that were meant to show that Facebook puts the “bottom line” above all else, including the protection of its own users.

Yesterday, Facebook promised new safety features to protect teens from harmful content and reduce political tensions. Did investors buy it? Let’s look at the chart.

Facebook Daily
Facebook Daily

Given that the price gapped down, we’re inclined to think that investors were not impressed with Facebook’s attempt to save face, just like they weren’t moved with the company’s apology after the blackout.

The falling gap on Monday completed a rising flag, within a falling channel. The flag is bearish, given that it follows a preceding drop. The flag’s rising bias is amid profit-taking by lucky bears who shorted the stock before the flag.

The rise comes as they presumably cover shorts. However, the price is not taking off which suggests further bearish pressure. The downside breakout demonstrates that the downtrend, framed by the falling channel, endures.

If this scenario plays out, the price could fall below the 200-DMA, adding more momentum to the downtrend.

Trading Strategies

Conservative traders should wait for the price to fall below the 200-DMA, then find resistance on attempted dip-buying, adding evidence to the downtrend.

Moderate traders would wait for the same move, a fall below the 200-DMA, followed by a corrective rally, for a closer entry, not necessarily for proof of resistance.

Aggressive traders may short now, provided they accept the greater risk that goes with the higher rewards when getting in before the rest of the market. Therefore, a trade plan is very important to manage risk, while allowing the potential for profit. Here are the basic points of a coherent trade plan:

Trade Sample – Aggressive Short

  • Entry: $325
  • Stop:Loss: $330
  • Risk: $5
  • Target: $310
  • Reward: $15
  • Risk:Reward Ratio: 1:3
Chart Of The Day: Why It’s Time to Sell Facebook’s Stock
 

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Chart Of The Day: Why It’s Time to Sell Facebook’s Stock

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