Facebook (FB): Breaking Down From Indecision

Conclusion, Investment Implications, Strategy

Facebook, Inc. (FB) is breaking down from 4 months of sideways indecision amid an early November trend of Strategic relative underformance versus the S&P 500. A sustained decline below the $273.35 area would further confirm recent weakness and target an additional 20% decline to $215.00 per share. Moreover, considering the US broad market’s current over-extended condition, we view this idea as a potential hedge against an upcoming, overdue corrective decline.

Analysis and Rationale

Facebook, Inc. (FB) develops products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and in-home devices worldwide. The company’s products include Facebook that enables people to connect, share, discover, and communicate with each other on mobile devices and personal computers; Instagram, a community for sharing photos, videos, and private messages; Messenger, a messaging application for people to connect with friends, family, groups, and businesses across platforms and devices; and WhatsApp, a messaging application that is used by people and businesses to communicate in a private way. It also provides Oculus, a hardware, software, and developer ecosystem, which allows people to come together and connect with each other through its Oculus virtual reality products. Facebook, Inc. was founded in 2004 and is headquartered in Menlo Park, California.

Chart 1 below plots FB daily since July in the upper panel along with its 200-day moving average (widely-watched major trend proxy), with a corresponding chart of FB’s daily relative performance versus the S&P 500 (SPX) and its 63-day (quarterly, our Strategic time frame) moving average in the lower panel.

The red highlights in the upper panel point out that FB is currently breaking down from 4 months of sideways investor indecision, which suggests an important top is in place at the August high. A sustained decline below the lower boundary of the indecision area at $273.35 would help confirm this and target an additional 20% decline to $215.00 per share.

The lower panel shows that FB has been underperforming the benchmark SPX on a quarterly basis since Nov 9th, which led the outright price weakness we are seeing this week.

Chart 1

Table 1 below shows that considering the downside target of $215.00 and a protective stop placed above the $280.44 area, a short entry price of $268.49 would provide a 1:4.5 risk/reward ratio (risking $1.00 to make $4.50) with an initial risk of 4.5%.

Table 1

Click Here for a table containing all of our current stock, ETF and index ideas.

Please consult the table showing our Asbury 6 key market metrics to help determine if this investment is suitable for you.

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Facebook (FB): Breaking Down From Indecision

Conclusion, Investment Implications, Strategy

Analysis and Rationale

Asbury Research

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Facebook (FB): Breaking Down From Indecision

Conclusion, Investment Implications, Strategy

Analysis and Rationale

Asbury Research

Asbury Research subscribers get more detail on our latest analysis, and updates to our quantitative models

Schedule A 15-Minute Zoom Meeting With Us To Get More Information >>>

Asbury Research subscribers get more detail on our latest analysis,
and updates to our quantitative models