FB Update

Yesterday I opened a Call position in FB (June $27), in retrospect I should have gone with July, but I'll likely remedy that in the near future. FB is kind of interesting as you saw the strength of the divergences yesterday, the first time any positives have shown up since it started trading. Based on their IPO fee and how much support they threw at 3 different price levels on the first day ($40 and $38 being the last two), I can't see how MS is not at a significant loss from the first day of trade. As I said yesterday, I see no fundamental reason why FB would rally now-there's no new initiatives from the company, oversold is a hard argument to make for a new IPO that has a valuation that is insanely high, the only thing I see as probable is MS and perhaps GS trying to recover losses and being they are two or at least 1 of the most well connected financial firms if not the most well connected (specifically GS), it's interesting that they chose the date they did to start the move; they and any one in the market for 6 months knows the market exerts the greatest gravitational pull on individual stock prices on any given day.

Here's the FB updated charts, I'm holding the position for now and may look to roll it to July.

 FB 1 min showed some selling late yesterday near the close, then a positive divergence today in to the a.m. lows, a small negative as FB moved up a bit and as it came back down another positive divergence starting. I won't speculate on yesterday's late day selling (which is only intraday-it's not enough for me to be concerned about the bigger picture/premise of yesterday's position), but I would say today's minor negative divergence looks like market makers working an order.

 FB 2 min, even if you aren't in the trade or interested in it, this chart is revealing with regard to how orders are filled and the role of market makers/specialists, May 31 on the open there was a negative divergence sending FB to the lows of the day, from there a strong leading positive divergence and although it looks like there was accumulation throughout that period, some of the specific points are pointed out and you can see each of them is at the lows of a minor pullback. You can see the late afternoon negative and today' positives that are now at a new leading high, although this is no where near as large as the positive divergence at yesterday's lows. Also note the positive divergence at yesterday's lows is in the tell-tale flat trading range where we commonly see divergences, I believe this is market makers, etc trying to create stability in prices to fill an order at a customer's specific requested price, we just see this too often to think it is coincidental.

 The 3 min shows the start of the positive divergence I mentioned on the 29th, it has grown immensely since then at lower prices.

 The 30 min chart reduces the noise of intraday divergences an uncovers the trend, FB saw 3C confirmation of the downtrend the entire time until the 29th, where the positive divergence started. Even though we don't have much historical data for FB to judge by, a 30 min positive divergence that is leading and develops so quickly is an important signal, it's why I took the trade. I would say MS/GS has a significant amount invested in accumulating shares on the cheap, I'd expect much higher prices in the near future.

Although we don't have a lot of data for the Trend Channel, the 30 min version held the downtrend well, the stops for a short (downtrend ) are always the lowest point of the channel, the downtrend wasn't violated until the character of FB changed and ir stopped out at the red arrow. Currently for a long position, the highest point of the lower channel is the stop which is currently at $27.55, this should allow room for consolidations and will lock in gains as FB moves higher. If this becomes a larger move, we'll need to use a wider channel to let FB consolidate.