Earlier today and in
a subsequent update the charts showed what seemed to be a pullback in FB, we had a target for the pullback and FB closed within 8 cents of the target, down -.33% today vs the NASDAQ 100 at -1.66%.
I'd really like to use a wider Trend Channel stop on FB, but there's not enough historical trade for a daily channel, so the 60 min channel has had to do and it held today as well. The bottom line remains, despite near term volatility, I still really like FB's signal. The last trade with such a strong signal (not even as strong) was GLD which made some members 200+% using calls as GLD traded up for its biggest 1 day gain since 2009.
These are the kind of signals 3C was built for, these are the trades with a real edge.
A quick look back on what happened with FB as there are some principles that were in play that can be applied to nearly any asset in any timeframe.
Today's triangle in FB wasn't huge, but for those trading it, they noticed. If you are pretty knowledgeable about these price patterns from technical analysis principles, than you have a pretty good idea of what they represent and what traders expect; the market just so happens to use these patterns against traders more often than not. The triangle broke to the upside as the price pattern implied (which would bring longs in who were waiting for confirmation of the price pattern-however few that may be), then the typical head fake move. For newer members, FB's price pattern, according to technical analysis suggested a consolidation that would break out to the upside and start the next leg up, it's just traders are so predictable (and just about anyone can view the book in level 2 or Totalview) that the pros take advantage of their predictability. In FB's case, the longs who bought the triangle of the breakout from the triangle were at a loss when FB moved lower, this creates selling and a snow-ball effect to give reversal more momentum, it's seen on just about every stock with an obvious technical price pattern and in every timeframe from 1 min to monthly. Note the tw0 light blue hash marks next to price, that shows the bid/ask for FB in after-hours.
The pullbacks I mentioned on the X-over screen above are rough estimates, but typically pretty close, I thought the dark blue 22 bat (60 min) area would be tagged, FB closed within 8 cents of that level. The only thing I don't like here and reason I'd rather use a wider daily stop is the trend is very defined and that up-trendline (not drawn here) would be another shakeout target. Wall St. firms also make money via volume rebates by creating volume by hitting limit orders/stops.
The Trend Channel (used on a closing basis) held the pullback, this is a 60 min, there's not enough trade data in FB to create a wider daily channel yet, which would be my preference.
The 5 min FB chart showing accumulation at the lows and a negative divergence recently, a pullback probably wasn't such a stretch to call here.
The intraday mechanism on a 1 min chart for the pullback shows the breakout of the triangle seeing distribution in to the move, thus what was suspected to be a head fake move early today before it started was confirmed by 3C. Toward the end of day there's a small positive divergence forming which is what we want to see in to pullbacks when we're long the stock.
The longer the 3C chart timeframe, the more important the signal, this 60 min chart needs to annotation, the change in character from confirming the downtrend to a leading positive divergence is clear, this is a VERY strong bullish signal.
Money Stram is even giving a 3 day positive divergence in FB, also the candlestick pattern on this chart tells us something about the change in character in FB's trade.
I still like the position.
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