$FB held my quarterly pivot $160.96 with after-hours low of $158.01. Target - $171.77.
Original story posted at 1:36 pm Wednesday:
Facebook (FB) - Get Reporttraded to its latest all-time intraday high of $166.17 on July 24, just two days before reporting its quarterly earnings, to be released after the close Wednesday. Given positive technicals, momentum traders are expecting the stock to continue to trade higher. My call: If share-price weakness holds my quarterly pivot of $160.96, the upside is to my semiannual risky level of $171.77, which would be a fresh new high.
Facebook closed Tuesday at $165.28, up 43.7% year to date and in bull market territory 45.6% above its post-election low of $113.55 set on Nov. 14. Analysts expect the company to earn $1.13 a share for its quarter ended on June 30. Some worry about slowing growth in advertising revenue. Others focus on the growing popularity of the social media giant's Instagram platform.
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My focus is on the weekly chart for Facebook but it's important to note that the stock has been above a "golden cross" on its daily chart since Feb. 1, when the stock closed at $133.23.
A golden cross occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating that higher prices lie ahead. This signal tracked the stock from $133.23 on Feb. 2 to the all-time high of $166.17 set on July 24.
The Weekly Chart for Facebook
Courtesy of MetaStock Xenith
The weekly chart for Facebook is positive but overbought with the stock above its five-week modified moving average (in red) at $156.71. The 200-week simple moving average or "reversion to the mean" (in green) is $96.62.
The "reversion to the mean" is an investment theory that the price of a stock will eventually return to a longer-term simple moving average, and the 200-week is simple to track. A ticker trading above its "reversion to the mean" will eventually decline back to it on weakness. Similarly, a ticker trading below its "reversion to the mean" will eventually rebound to it on strength.
The 12x3x3 weekly slow stochastic reading is projected to rise to 86.26 this week, moving further above the overbought threshold of 80.00.
Trading strategy: Buy weakness to my quarterly value level of $160.96. Reduce holdings on strength to my semiannual risky level of $171.77.
If there's a negative reaction to earnings, a weekly close above the 5-week modified moving average of $156.71 would keep the weekly chart positive but overbought.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.