Is this a good time to be buying Facebook stock? In this article we will examine the stock chart of Facebook to learn about the longer term outlook and shorter term outlook.
Facebook is a stock that has been beaten down very badly. That is why we need to use the monthly charts to determine where are the important support levels are.
As you can see from the chart above, Facebook is now sitting at a monthly uptrend line support. It is also sitting at the top of a monthly ascending triangle which it broke out of long ago.
For those of you who do not know, the top of an ascending triangle pattern can be a support.
A monthly bottoming tail may be forming and by next month we will know whether the bottoming tail materializes. The presence of a bottoming tail tells us that the stock may want to bottom.
With support below, it may be a good time for long term investors to start buying the stock again.
There is quite a difficult road ahead for Facebook if you look at the daily chart. The stock has recently gone back above the 20 MA which is a good sign. However, it has yet to go back above the 50 MA. When a stock is below the 50 MA and 200 MA, we usually consider it not to be healthy yet.
The stock has a nasty gap down and the gap area can act as a stubborn resistance which needs time to be absorbed.
For some market timing, we need to employ the 60 min chart. Recently, it made a double bottom and broke above a downtrend line. The correct area for a short term buy would be when it gap above the downtrend line.
To buy now for short term trade might be a bit risky. But for long term investors you can nibble at it here and there. As long as Facebook does not drop below the double bottom, the stock is ripe of a long term bullish reversal back up.
Nasdaq and Facebook is quite overbought right now and there may be a correction coming or at least some sideways movement. So do take a look at the green support area I have highlighted. As long as Facebook remains above this area, then it is likely to continue to move up. Otherwise a deeper correction may follow.
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