Facebook (FB) is the Stock of the Day at Real Money this frigid, frigid (did I say frigid) Thursday. We last looked at FB back around the middle of December when many market "pundits" said the sky was falling.
We said, "So back to the question at hand: Has Facebook bottomed? After declining about $90 in four months I think we need more sideways price action and more signs of renewed buying."
And about our Point and Figure chart we wrote, "In this Point and Figure chart we can see a possible upside price target of $165 being projected."
Now that prices are trading above $165 this morning, a fresh look at the charts and indicators seem to be in order.
In this daily bar chart of FB, below, we can see the price action through Wednesday's close and we have to imagine the gap higher that will be on the chart later today. Prices are above the flat 50-day simple moving average line. The slower-to-react 200-day simple moving average line looks like it is bottoming and is likely to be tested today.
Notice the movement in the daily On-Balance-Volume (OBV) line? It makes a low in the middle of November and has been rising which tells me that buyers have been more aggressive for more than two months. This is a big change from the previous four months of decline.
The trend-following Moving Average Convergence Divergence (MACD) oscillator crossed above the zero line earlier this month signaling an outright go long message.
In this weekly bar chart of FB, below, we can see the price action without the benefit of the recent surge higher. Prices are below the bottoming 40-week moving average line but we are likely to see that line being tested today.
The weekly OBV line shows a long rise the past three years and the softness in the line from September does not look so bearish in today's light. The weekly OBV line could make a new high for the move up this Friday.
The weekly MACD oscillator crossed to the upside earlier this month giving us a weekly cover shorts buy signal.
In this Point and Figure chart of FB, below, we can now see a new upside price target of $195.64.
When the chart is updated later today the chart should show a big column of "X's" up to the $168 area or higher. A rally to around $196 will be a partial filling of the huge downside price gap made back in late July.
Bottom line strategy: FB is going to gap higher today and while we may see some intraday softness or an intraday dip we are probably not going to see the market back down to the $150 area. That train has left the station. Give FB a few days of sideways price action before adding to longs so we can put a sell stop below the lows of that price action. The $196-$200 area is my new upside price target for the next few months.