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Trading Facebook as Market Cap Tops $1 Trillion - Now What?

Facebook joins the $1 trillion market cap club. How do we trade the stock after such a strong rally? Let's look at the chart.

Shares of Facebook  (FB) - Get Report were slipping on Tuesday, falling 1.5% in midday trading. Still, that’s not the talk among traders.

Instead, it’s the 4.2% rally Facebook enjoyed on Monday, which sent the stock to a $1 trillion market cap.

The company joins some of its other FAANG components at the mark, including Apple  (AAPL) - Get Report, Amazon  (AMZN) - Get Report and Alphabet  (GOOGL) - Get Report . Microsoft  (MSFT) - Get Report, while not a FAANG stock, also is a member of the club.

Jolting Facebook higher was news that two antitrust suits were dismissed against the company.

That shifts some of the attention away from Facebook and back toward some of its other FAANG peers. However, it gives investors some confidence that perhaps these companies will see a similar result.

Now that Facebook has hit a $1 trillion valuation what do the charts look like?

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Trading Facebook

Weekly chart of Facebook stock.

Weekly chart of Facebook stock. 

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Facebook’s weekly chart does a great job illustrating the ebbs and flows of the last six quarters. For instance, it captures the COVID-19 meltdown in 2020, as well as its torrid rally to new highs.

Shares bottomed near $137, exploded back through $225 in a V-shaped recovery, then went on to be stuck in a trading range between $250 and $300 for about six months.

Noticing a range-bound trade is very important, as it sets key rotation levels that we have to see the stock clear.

In the case of Facebook, that level was rather clear at $300. Once it cleared this mark in April, it held it as support, showing that the narrative had changed and that bulls were in control.

As investors have continued to bid the name higher, the question of “what now?” can’t be avoided.

After pushing through the 161.8% extension from the stock’s current trading range, investors will now want to see Facebook hold the $340 level as support. Below opens up a test of the 10-week moving average. Presently, that would seem like a great buying opportunity. 

On the upside, there are two key extension measures at $365. That’s the two-times range extension from the current range and the 261.8% extension from the Q1 2020 range (from the COVID-19 dip).

If Facebook can push through this area, then $400 becomes the longer-term target.