Journal Entry: The first thing I noticed on this chart was the declining volume for the bullish trend. Their is less and less participation in the rally for FB.
To be honest I will interject here for a moment, I have not had a Facebook account for a few years, and after just recently creating another account I can see where Facebook is going to be the next possible penny stock. After the first day of having my account, I was locked out and asked to provide verification with a phone number. That's normal, but what isn't is that it locked me out automatically based on "suspicious account activity" while I was logged on. Subscribers are going to look for something else based on this alone. The next problem I encountered was another lockout a few days later and I was requested to upload a photo for review in order to be allowed back into my account. It has been 3 days, and I am still locked out, all the while my email is Facebook receiving alerts from my account. This is enough, there is no point for subscribers to be abused for their own security.
OK. Back to the analysis on the chart that is reflecting this sentiment in the public. The volume is entering all time lows, and the there has not been any significant pullbacks, retracements, or reversals to sustain the energy in the trend; the stock is overbought. I think based on the 1 month price will be nearing it's last peak, or already has and is now going to begin a period of distribution or possibly sell off with a tremendous amount of fear. I have positioned one target which may be easily met, using intersecting points with Fibonacci Analysis. I am making a note that this is on the 1 month chart, and the daily may behave differently and trade to new highs, I also am noting that as the stock loses interest Facebook is going to be less of an influence on the indices themselves as investors re-allocate their funds. Finally I have a price floor drawn in as a blue box; if the stock trades below this point I expect another leg of the move, as always wait for confirmation.
God Bless.
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CORRECTION: I must have moved something around, here is the intersecting point.
I don't have a position in FB right and am neutral toward the stock at the moment, but want to mention a few things.
The volume decline is correlated with price increase, meaning that you naturally will have less traders for higher priced stock because less people can afford to trade it - think stocks like GOOGL, etc. I think what would be a better indicator is maybe CMF or something similar, which takes into account volume and price.
And overbought indicators do not work as well as oversold because a strong stock can be overbought for a very long time. Even the SPX has not had a significant correction for what over a year now?
That's not to say FB won't have a correction one day and when there is a significant correction of any sort, these high beta stock do tend to sell off quick.
UnknownUnicorn1564330
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@SkyRock, Wow thank you very much. Those are very good points and I appreciate your logic and reasoning especially with stocks being overbought longer then oversold. However I was not using an indicator to compute that the stock was overbought, I was simply relying on the amount of volume being traded to float the current price level. It is well below average. I also appreciate the law of supply and demand and can see the natural relationship between the stock price and the volume now, before I had noticed that due to the consistent decrease in the trading volume to the point where it is making consistent new lows below it's average. I will take all that into consideration for a contrarian standpoint.
The volume decline is correlated with price increase, meaning that you naturally will have less traders for higher priced stock because less people can afford to trade it - think stocks like GOOGL, etc. I think what would be a better indicator is maybe CMF or something similar, which takes into account volume and price.
And overbought indicators do not work as well as oversold because a strong stock can be overbought for a very long time. Even the SPX has not had a significant correction for what over a year now?
That's not to say FB won't have a correction one day and when there is a significant correction of any sort, these high beta stock do tend to sell off quick.