Facebook Technical Analysis: Correction Taking Place

Facebook Technical Analysis: Correction Taking Place
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FB/USD

The price of Facebook stock has been moving sideways from 5th of February when it came up to $171.45 at its highest point from where a decrease has been made to $159.84 which is the current horizontal  support level after which another increase was made to $174.21, slightly higher than the previous upswing after which another decrease has been to around the same level as last time.

This indicates that the buyers have been holding their ground but haven’t managed to trigger another increase as we have seen from 24th of December last year, and could be interpreted as the first sign of weakness.

Looking at the hourly chart, you can see that the price action started forming an ascending wedge which is usually seen at the end of the 5th impulsive move as an ending diagonal. This could be the interpretation of the current sideways movement although the five-wave move out of which the ascending wedge could be the ending point might have ended.

The choppy price action in conjunction with the missing date makes it hard to count the sub-waves, but in either way since the price has encountered significant resistance at the upper ascending trendline whose significance you will see on the weekly chart and the 0.5 Fibonacci level the momentum has slowed down dramatically and we are now likely to see a retracement.

If the five-wave move ended the retracement could have already started but looked at the current wave structure I think that the first scenario is more likely which is why I am considering it as my primary one although the alternative has been taken into account.

The price of Facebook stock has experienced an impulsive decrease prior to the rise we have seen on 24th of December which led the price on a 43.61% depreciation from the all-time high at $218.66 to $122.71.

 

Looking at the weekly chart you can see the significance behind the lower ascending trendline which was the baseline support from the five-wave move of a higher degree reaching the all-time high and was broken when the price started falling down on 25th of July last year.

This lower ascending trendline is now strong resistance from the sideways ascending range in which the price has been since February and the interaction with the level is causing the buyers to lose momentum.

As the five-wave move ended we are likely seeing a correction taking place or even the start of the bear market for the price of Facebook stock so now as the five-wave move seen on the hourly chart ended it was most likely the first wave of a three-wave move to the upside out of the ABC correction of a higher degree.

This means that now then the five-wave move seen on the hourly chart ends I would be expecting another minor retracement potentially to around the 0.236 which is in price terms at $143.67 which would be the B wave after which another five-wave move to the upside would develop but only as the last C wave before another five-wave move to the downside starts as the C wave of a higher degree.

 

About Nikola Lazic

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