Facebook still remains the biggest social media platform, growing its user base to about 1.9 billion daily users and 2.8 billion monthly active users. Facebook stock was down to $137.21 per share in March 2020, losing approximately 38% in the first three-month of 2020. But boy, what an entry point that low turned out to be. Facebook stock surged to nearly $306 by August 2020, up 120% in five months. Unfortunately for the bulls, since August 2020 the bears have taken over and sent the price to $243 for a 20% correction. As of this writing, it is still down some 10% from the record high. Should investors buy this dip?
Elliot Wave View The daily chart above puts the post-March 2020 surge and the subsequence sideways move in the Elliott Wave context. The surge from FB’s coronavirus low of $137.21 in March 2020 took a shape of a five-wave impulse. The pattern is labeled (i)-(ii)-(iii)-(iv)-(v) in wave A. According to the Elliott Wave theory, a three-wave correction in the opposite direction follows every impulse. And indeed, the sideways decline that started from $305.05 high in August 2020 fit for the three-wave correction.
This range-bound price move that has been unfolding for almost eight months has a place in the Elliott Wave principle and is very fit for a contracting triangle pattern, which is labeled as (a)-(b)-(c)-(d)-(e) in wave B.
Facebook Bears Are Overstaying Their Welcome According to the Wave Principle, a triangle usually precedes the final move of a sequence and the price will resume in the direction of the impulse once a three-wave correction is completed. Considering that the triangle corrective pattern is completed, it makes more sense to expect a rally above the 2020 high of $305.05. Aside from the Elliot Wave principle, Facebook price action has been respecting 200-day Exponential Moving Average, this indicator usually acts as a strong demand zone during a corrective phase and only reinforces our optimism. If this analysis is correct, Facebook stock has the potential to rally above 400/share, that’s a 45% advance from the current market price.
What's your view on Facebook stock? Let me know in the comment. Thanks for reading! Veejahbee.
It does have some consolidation at e and support from the MA. It looks like it could break out. The two rejections at the upper trendline are a bit concerning as they look like double tops. I would be bullish if the price breaks above the upper trendline and retests the trendline from the top and closes above it. The trendline is still bearish, so I would wait for a breakout retest confirmation before making a trade. The downside would be the price retesting the MA and it could take a while to retest the upper trendline again. At worse it could close below the MA and that would not be good as there are gaps to be filled sitting below the support level.
$400 in what time frame? It's not a growth stock anymore. I think it's peaking at 2.8B users already because everyone's been staying at home and on social media already so it's priced in. I can't see it growing 1B new active users when the pandemic is over. Plus it's privacy issues, fight with Australia and fight with Apple have some users turned off.
BTW Don't get me wrong I've been long FB, but I've seen the bad year in 2018, so $400 is not realistic to me.
Veejahbee
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@BrokenTypewriter, Thanks so much for your contribution. I would be looking to buy if the price breaches the $287.54 key level on the chart, that's the point where the bullish triangle wave count will be validated. The breakdown of the $252.46 key level and moving average will invalidate the current setup but not the overall bullish scenario, that is, the correction will only get extended.
I'm a pure technical guy, so $400 is the target based on the 100% extension of the previous leg. It's plausible it just a 45% rally from the current level and can be achieved within 3-6 months considering the previous 120% run took just five months.
ProjectSyndicate
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interesting wave mark-up for the facebook, thank you for the heads-up.
$400 in what time frame? It's not a growth stock anymore. I think it's peaking at 2.8B users already because everyone's been staying at home and on social media already so it's priced in. I can't see it growing 1B new active users when the pandemic is over. Plus it's privacy issues, fight with Australia and fight with Apple have some users turned off.
BTW Don't get me wrong I've been long FB, but I've seen the bad year in 2018, so $400 is not realistic to me.