Facebook (FB) stock price has been in decline since the company reported it’s 1st quarter 2015 earnings results, even though results handily beat the bottom line consensus expectations. Turns out this is not usual price action and might even signal support has been, or close to being, reached.
The chart above shows the last two correction in the last 12 months also equaled about $9 points. And here we once again run into a correction of the same size, while taking out a prior swing low, for a brief period, in the process. It’s certainly possible that the low at $76.79 yesterday, ended the correction. If this is the case, the initial target for longs would then become $88.
This target is derived by looking at the size of the last two rallies off their $9 point correction lows. Each rally produced a new all time high, about $12 points higher ($70.32 low to $82.17 high and $73.45 low to $86.07 high) this gives us $88 as a logical upside target. This pattern will eventually be broken one way or the other, but until it does it’s usually best to let the trend be your friend.
If by chance the market spends much time below yesterday’s low then I would expect a continuation of the correction to take the stock price down to at least the $72.50 level which happens to be the prior swing high that was put in prior to a 20%+ correction experienced in early 2013.
(Disclosure: long FB)
Technical Investor 