QuantitativeExhaustion
Long

FB Cup and Handle Continuation, $46 Breakout

BATS:FB   FACEBOOK INC
2262 26 21
I don't think Cramer will get his $23 FB             .
Cramer discussed 4 charts, and he thinks these 4 stocks , which form the acronym FANGs, are the new tech stocks to watch. Facebook             ( FB             ) has a ceiling of resistance at $32, and if it pulls back to $23, Cramer would buy, since FB             is showing a bullish cup and handle formation. Amazon ( AMZN             ) has roared out 10% from its head and shoulders formation. If the stock goes below its support of $250, it might be worth buying, particularly if it drops to $215. Netflix             ( NFLX             ) is in a bullish pennant pattern, but it has had a huge move, and the stock may move sideways for a while. Google             ( GOOG             ) has risen significantly, but may have 10% more upside.
http://www.cnbc.com/id/100436754/Cramer_Does_Your_Portfolio_Have_FANGs

As its name implies, there are two parts to the pattern: the cup and the handle. The cup forms after an advance and looks like a bowl or rounding bottom. As the cup is completed, a trading range develops on the right hand side and the handle is formed. A subsequent breakout from the handle's trading range signals a continuation of the prior advance.

Trend: To qualify as a continuation pattern, a prior trend should exist. Ideally, the trend should be a few months old and not too mature. The more mature the trend, the less chance that the pattern marks a continuation or the less upside potential.
2. Cup: The cup should be "U" shaped and resemble a bowl or rounding bottom. A "V" shaped bottom would be considered too sharp of a reversal to qualify. The softer "U" shape ensures that the cup is a consolidation pattern with valid support at the bottom of the "U". The perfect pattern would have equal highs on both sides of the cup, but this is not always the case.
3. Cup Depth: Ideally, the depth of the cup should retrace 1/3 or less of the previous advance. However, with volatile markets and over-reactions, the retracement could range from 1/3 to 1/2. In extreme situations, the maximum retracement could be 2/3, which conforms with Dow Theory.
4. Handle: After the high forms on the right side of the cup, there is a pullback that forms the handle. Sometimes this handle resembles a flag or pennant that slopes downward, other times it is just a short pullback. The handle represents the final consolidation/pullback before the big breakout and can retrace up to 1/3 of the cup's advance, but usually not more. The smaller the retracement, the more bullish the formation and significant the breakout. Sometimes it is prudent to wait for a break above the resistance line established by the highs of the cup.
5. Duration: The cup can extend from 1 to 6 months, sometimes longer on weekly charts. The handle can be from 1 week to many weeks and ideally completes within 1-4 weeks.
6. Volume: There should be a substantial increase in volume on the breakout above the handle's resistance.
7. Target: The projected advance after breakout can be estimated by measuring the distance from the right peak of the cup to the bottom of the cup.

As with most chart patterns, it is more important to capture the essence of the pattern than the particulars. The cup is a bowl-shaped consolidation and the handle is a short pullback followed by a breakout with expanding volume . A cup retracement of 62% may not fit the pattern requirements, but a particular stock's pattern may still capture the essence of the Cup with Handle.

Chaikin Money Flow ( CMF             ): An oscillator that helps signal if a stock is undergoing accumulation or distribution. It is calculated from the daily readings of the Accumulation Distribution Line. The CMF             is unlike a momentum oscillator in that it is not influenced by the daily price change. Instead, the indicator focuses on the location of the close relative to the range for the period (daily or weekly). See ChartSchool article on Chaikin Money Flow .
http://stockcharts.com/school/doku.php?id=chart_school:glossary_c#chaikinmoneyflow
jmtbernardo
3 years ago
Cramer has good ideas, but he is not technical trader. His wife is, but I don't think she is working anymore.
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QuantitativeExhaustion PRO jmtbernardo
3 years ago
This idea did not come from Cramer. It came from me about 10 weeks ago.
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QuantitativeExhaustion PRO jmtbernardo
3 years ago
FB
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jmtbernardo QuantitativeExhaustion
3 years ago
It was just statement, because I have read his book.
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QuantitativeExhaustion PRO jmtbernardo
3 years ago
Never read the books, but I watch his shows becuase he now includes more advanced topics. Few years ago Mad Money was simple and basic for avg. Joe and Jane.
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jmtbernardo QuantitativeExhaustion
3 years ago
Yes indeed, he makes some good logical points about the fundamentals, but his technical game continues to be very simple.
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Have not bought yet. FB is on my long call conviction buy list over next few weeks.

Small firm perma bear FB analyst gives investors another buying window.

2012 June 4 Facebook: Bernstein Launches At Underperform, $25 Price Target
http://www.forbes.com/sites/ericsavitz/2012/06/04/facebook-bernstein-launches-at-underperform-25-price-target/
Concludes Kirjner: “With $21/share from display advertising under the relatively aggressive assumption that Facebook will double its share of the display advertising market in five years, plus $4/share in expected upside from both social advertising and new (yet-to-be-defined) businesses, we arrive at our target price of $25/share, which is more than 10% below the stock’s current price. In other words, it seems to us that the market is still attributing material, and given the currently available data, overly optimistic, upside from social and/or new businesses to Facebook.”

2013 Feb. 11 Bernstein Research analyst Carlos Kirjner
http://www.forbes.com/sites/ericsavitz/2013/02/11/feeling-asocial-bernstein-cuts-facebook-to-market-perform/?partner=yahootix
Kirjner says that mobile and Facebook Exchange are off to a slower start than expected. He contends that the 18% year-over-year growth in price-per ad in North America in the latest quarter was “anemic” given that the company did not have high-priced mobile newsfeed ads in Q4 2011, making the comparison an easy one.
The analyst notes that Western Europe and North America together account for about 70% of revenues But he adds that for revenus to grow fast enough to justify a 15x 2014 consensus EBITDA multiple likely requires 20% growth in those markets. “For that to happen,” he writes, “revenue growth will have to come from new initiatives such as a (lower margin) ad network, must faster growth of FBX impressions and revenues and an acceleration of the organic growth of price-per-ad, that is, an inflection in pricing power, which in turn will depend on high advertiser ROI.”
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DanV MOD
3 years ago
Hi, You seem to have gone at length to details the "Cup & Handle" Pattern and why it is continuation pattern. However, there is a one very important fact about "Cup & Handle" Pattern which as you suggest continuation pattern, that is in an up trend it appears after noticeable rally to the upside, then a pause over a period forming the "Cup & Handle" which on completion continues up. However, what you are describing in Your chart on FB cannot be "Cup&Handel" as it would be in wrong place namely at the base. So what are we to conclude, if it continuation, what is it continuing? the downtrend or uptrend? Hope this is not the case of fitting any pattern to line up with your view rather than what it really is. If it works out as you suggest then might be more likely to be inverted H&S ie reversal rather than continuation. However, if it fails then it also has H&S pattern on the right hand side signalling this stock to plumb lower. The CMF Indicator as it is presently suggest breakdown of price not uptrend. Time will tell.
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Case in point Sirius SIRI, C&H second half of 2004. I traded SIRI shares which were a C&H at the bottom and that ended up being a triple handle breakout through 2005. However, you could also argue that Sirius was coming off its .37 low from 2002/03

In the case of Facebook and EW we might as well say it's been a bull trend continuation since 2005. Yes the company did not go public till this year, and you have to also realize EW is not based on price, but behavior. FB the company has been in growth mode since it's inception and growing number of users/time spent on site/pageviews per user/ ect.
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timwest PRO QuantitativeExhaustion
3 years ago
I wish I read this reply before writing my reply about "Cup&Handle's". I might not have replied in the first place. However, I can add that SIRI's base was a base pattern. I guess I react to the name "Cup&Handle" as it was applied by William O'Neill. We are glad to have a team effort to find great stock patterns that provide huge upside potential compared to downside risk. When I look at the risk of owning stocks, the odds of losing 50% of your capital over the life of your holding period is quite high. From the time I started in 1984, I've seen huge market declines in 1987, 1990, 1994, 2000, 2008-9. I appreciate all the ways to hedge a portfolio and to minimize the negative effects of volatility and drawdown that those bear markets have imparted. Thanks for your diligent efforts and keep up the good work.
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snapshot


Cup and handle double
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timwest PRO QuantitativeExhaustion
3 years ago
Looks good JR. Let's not get lost in terminology. We can all agree that making money is the goal here. Sometimes we just have different labels for things and that is ok by me. That's why I stay away from even replying to most people's charts but you have my respect and I wanted to add my comment so we can use the same words without misunderstanding. Keep up the good work.
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timwest PRO DanV
3 years ago
Thanks for saving me the time to explain: Cup&Handle's are near a stock's all time highs when all investors are making money - not when there is an overhang of stock looking to get out after suffering through a dramatic 50%+ loss of capital first. I still appreciate good ideas and defined risk:reward setups, so keep the ideas flowing.
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I appreciate the comment. You have to also consider the value of Facebook Company before IPO date. Facebook wasn't an 80 billion dollar company in 2005. I remember joining Facebook in 2005, they had 10 million users. Now they have 1 billion+ users. The value of Facebook in just a few years has grown from a small start-up worth a few million, to a 40 to 100 billion dollar social media company in 2012-13.
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DanV MOD
3 years ago
Hear is my charts to explain my previous comments. I think this stock is in dire trouble from technical perspective. 
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We shall see.

I think your ascending neckline is a bit steep for a H&S.
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VolHunter DanV
2 years ago
Does not look Dire
Reply
snapshot


Eating Crow herer ... nmike might be right on with FB. I'll add some possible predictions that may help us all with this stock. This is far stretch but possible. For this overall C&H to work and a handle to reach the lip of the cup extended resistance, we will need a smaller inverted H&S to show up in the next few days/weeks.
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QuantitativeExhaustion PRO QuantitativeExhaustion
3 years ago
Now that I look at the overall C&H, a deep handle makes much more sense now. The cup has a more defined u shape, which means handles are more than often deep. If you have more of an ovular shape, handles tend to be shallow or strung along the extended lip of the cups resistance.
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VolHunter
2 years ago
Too Soon
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Trucking
2 years ago
gOOD cALL
+1 Reply
DebraSmith
2 years ago
face book has a small cup handle....today....
+1 Reply
SirRally
2 years ago
Great Call here!
Reply
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