Shares fell 1.67% to $177.10 in Friday's action, as selling pressure mounted in the overall market. In the case of Facebook, though, the selling began last week as the stock ran into multiple points of resistance.
It didn't help this week that reports surfaced of the DOJ investigating Facebook for antitrust issues. This would be a separate antitrust investigation from the FTC and a group of state attorney generals. In other words, Facebook is caught in the regulatory spotlight.
Now, though, Facebook stock is encroaching on strong support, providing investors with a reasonable risk/reward on the long side.
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Trading Facebook Stock
Facebook stock has been pin-balling between ~$175 and ~$190 for the last two months. Adding some weight to those ranges, the 78.6% retracement is in play near range resistance at $190.35 and the 61.8% retracement is near range support at $175.98.
As shares approach range support, investors will be looking for a bounce. However, Facebook stock also has the rising 200-day moving average just below $175.
With FB stock trickling down into support, it's setting up as a compelling long. Not so much for the bounce potential -- although that helps -- because the risk is very measured.
Should support fail, with the 61.8% retracement and 200-day moving average giving way, bulls know they are wrong on the trade and can exit with minimal losses. If they are right, Facebook stock could bounce. Remember, always look at the potential loss before the potential gain of a setup.
Below support and $174, puts the 50% retracement near $166 on the table, with 2019 range support beneath that at $160.
On a bounce, look to see if FB stock can reclaim the 50-day moving average. Above it puts the 78.6% retracement in play, with the September high of $193.10 above that.
The bottom line: ~$175 needs to hold as support for the bulls.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.