Facebook, Facebook, Facebook (FB) ! Exhale. The last time I looked at FB was earlier this month as part of a FANG story, where I wrote, "The pace of the price rise since May has slowed and this bearish divergence could foreshadow sideways or weaker prices in the weeks ahead. Longs should raise sell stop protection to below $190." With the super-sized downside price gap this morning our suggested stop loss order below $190 was little help or consolation.
Today and probably Friday (though the news cycle may have moved on) analysts will be interviewed and many, many reports will be written. Many analysts will talk about the "long term prospects" but that will likely be little consolation to investors with big losses in their accounts. Institutional investors, hedge fund biggies and others will also be under the gun to make the right move from here. Let's check the charts and indicators.
In this daily bar chart of FB, below, we can see that prices gapped below the rising 50-day moving average line and the rising 200-day moving average line. The volume of trading will likely be heavy and the daily On-Balance-Volume (OBV) line is likely to turn lower. The OBV was going up from late March suggesting the buyers were more aggressive in the past four months and that means there are some significant losses. The Moving Average Convergence Divergence (MACD) oscillator is likely to generate another take profits sell signal.
In this weekly bar chart of FB, below, we do not have today's price action plotted but we can imagine the damage. Prices are likely to close below the rising 40-week moving average line tomorrow. The weekly OBV line could turn down. The MACD oscillator is likely to narrow sharply towards a future crossover.
In this first Point and Figure chart of FB, below, we can see the big decline without the price gap. Point and Figure charts do not have gaps. There is some chart support in the low $160's to the low $150's, but will buyers appear?
In this second Point and Figure chart, below, we have added volume at price bars on the left scale. There appears to have been some heavy trading from $168 to $186 and those longs are the near-term key to what happens next. Sometimes investors just want to get even and sometimes they are buyers when their entry price is seen again.
Bottom line: It would be nice to know where FB will be trading in a week or a month or next year. It would be nice to tell you that with certainty, but technical analysis is not that powerful. After years of working at sell side firms holding the hands of brokers who were holding the hands of clients I firmly believe it comes down to your cost basis. If you have a profit in FB you have time to calmly make a decision. If you are "under water" you should cut your losses and dust yourself off. Holding a big loss will cloud all your decisions going forward.