Although the stock is only suffering a mild 4% dip on Thursday, it’s not the reaction that bulls were hoping for.
Facebook easily beat earnings and revenue expectations. However, management’s guidance rattled investors, which triggered today’s decline.
That’s despite the pretty solid results we saw from Alphabet (GOOGL) - Get Alphabet Inc. Class A Report, as well as the strong response we saw in Snap (SNAP) - Get Snap, Inc. Class A Report after its better-than-expected results.
That said, let’s not ignore the fact that Facebook is only down slightly after the print and hit an all-time high in Wednesday’s session.
Trading Facebook Stock
Notice how shares of Facebook were bumping up against $375, but couldn’t break out? That looks somewhat similar to the $358 level, which was prior resistance before the stock’s breakout.
Now dipping to that area and the 10-day moving average, bulls are looking for a buyable dip. Aggressive bulls are likely taking a position now, given this confluence of potential support.
Should the stock bounce, look for a move back to or above Thursday’s high, near $365.
Above $365.50 and the $375 area may be back on the table, but Facebook may need a bit more of a pullback.
In that scenario, I would like to see how shares handle a dip down to the 21-day moving average and the gap-fill area around $351. Below that may put the 50-day moving average on the table.
Facebook has been a huge winner so far this year, up 36.5% coming into Thursday’s session. While the quarter was solid, the guidance was not. That does leave us with some risk in the stock.
However, the trend is still to the upside, so until that changes — perhaps it becomes a downtrend or maybe it results in some sideways chop — bulls will be hesitant to alter their strategy.
Buying the dips has worked, but it becomes a question of, “how deep of a dip will it be?”
Keep an eye on these key levels to see where buyers really step in.