Based on the deteriorating technicals on Facebook's weekly chart, investors appear poised to reduce holdings on a potential drag on advertising dollars in the quarters ahead.
Shares of social-media giant Facebook could see a technical downgrade on its weekly chart as investors react to the knowledge that some 10 million people were exposed to Russian-backed Facebook ads that attempted to influence the 2016 presidential election.
Congressional investigations will soon be underway by three separate committees, and includes the details of some 3,000 ads that were paid by Russian entities to influence the election.
Facebook founder Mark Zuckerberg is amid this controversy. Just after the election, Zuckerberg questioned the validity of these claims, and now he is being apologetic.
To prevent future interference, Facebook plans to hire about 1,000 employees to review and change its global advertising systems to prevent election meddling abuse.
Shares of Facebook have been immune to these allegations. The stock closed Monday at $169.47, up 47.3% year to date and in bull market territory, 49.2% above its post-election low of $113.55 set on Nov. 14. The stock has been moving sideways to down by 3.4% since setting its post-election, all-time intraday high of $175.49 on July 27.
Weekly Chart for Facebook
Courtesy of MetaStock Xenith
Facebook has a positive but overbought weekly chart with the stock above its five-week modified moving average (in red) of $169.00. The stock is well above its 200-week simple moving average (in green) at $102.68.
The 12x3x3 weekly slow stochastic reading is projected to end this week at 80.82 down from 82.66 on Sept. 29, but still above the overbought threshold of 80.00.
If Facebook ends the week below the five-week modified moving average of $169.00, the stochastic reading will likely be below 80.00, which would downgrade the weekly chart to negative.
Investment strategy: Buy weakness to my semiannual value level of $150.17. Reduce holdings on strength to my quarterly risky level of $179.24.
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