When the chart turns ugly you have to throw in the towel and take a loss. When the chart turns bullish with a new 52-week high you also have to adjust your thinking. This brings us to Action Alerts PLUS holding Facebook (FB) this morning. The stock market was rocking and rolling or rather surging yesterday, and we started the morning off with even more buying to finish the week. In early trading Friday, FB is making a new 52-week high.
In late August and most of September, I was bearish on FB. FB had a deep decline in August, breaking its uptrend. When the decline was over and FB finally rallied back toward its July/August highs, it stopped. Stalling at or below a previous high can be a pre-condition of a possible double-top formation. In a market environment where other popular names had been taken to the wood shed, I was cautious. FB turned lower toward the end of September and the idea of a double top came back to me, but FB rallied again in October. The On-Balance-Volume (OBV) line has been moving higher and the trend-following Moving Average Convergence Divergence oscillator is rising and above the zero line. This is a bullish setup. Now, we're seeing the breakout.
FB is going higher, and the previous July-September highs will act as support now. How high can we go? There are fundamental price targets but the Point and Figure chart, above, gives a price objective of $115 right now.