FB Update

First I want to start with an email response from about FB from 12:22 today, I was asked how FB looked, my reply...

"3C is still holding up, price is still holding up as well as compared to the 6/4 lows, it hasn't made much of a new low, it is in a very recognizable bearish continuation descending triangle so it could see a head fake move"


FB is a stock that is being watched by everyone, it has been in a downtrend. There are 3 types of triangle consolidations, the most ambiguous of them all is the symmetrical triangle. This consolidation has no inherent bias and relies solely on the preceding trend so if the trend before it formed was up, it is expected to break to the upside, if the preceding trend is down, it is expected to break to the downside.


A descending triangle is inherently bearish, if there's a preceding downtrend (this describes FB perfectly), the triangle is considered to be VERY high probability to break to the downside and start the next leg lower which is usually the difference between the downtrend and the last consolidation to the current one, so in FB's case the last consolidation was a rectangle (same bias as a symmetrical triangle) between 5/22 to 5/29, the breaking point was around $31 and the downtrend to the next consolidation (the current)  was about $27, that means traders expect the current bearish descending triangle to break to the downside and travel $4 from the break (around $26.80), so they expect the next leg down to target the $22.80 area. The problem for the bears, the positive divergences which are now substantial.


Between the visibility of the bearish consolidation and the popularity of FB (not to mention the overwhelming bearish sentiment), it makes for an excellent upside candidate (not long term, I still think FB is way over-valued, but the market has very little to do with value anymore).

 The preceding downtrend and the inherently bearish descending triangle-this is exactly what they teach to look for in TA textbooks.

 A closer view of the bearish triangle.

Remember the volume spike concept that works on every timeframe? At the red arrow a volume spike with a bearish price candle that has a long upper wick, meaning higher prices were rejected, this is like a mini churning candle and they are excellent reversal signals on every timeframe. Then we get a bullish volume spike at the green arrow after FB breaks below recent support, there's high volume and a bullish hammer candle (reversal/support candle). This is almost certainly the head fake below the bearish price pattern I mentioned in the email around noon time.

 FB 60 min chart, this is a very strong timeframe/signal. FB shows confirmation of the downtrend at green arrows and around the 31st of May to the 1st of June, it goes positive, the same time the descending triangle starts forming. It becomes much easier for smart money to accumulate when traders are selling the triangle short, they provide the supply that smart money needs, the brea below the pattern does the same, except more traders will short that as most traders wait for confirmation of the pattern. In other words, their short selling provides supply to be accumulated in larger volume and it doesn't arouse any suspicions as someone has to take the other side of the trade.

 The 30 min chart should be stronger than the 60 and it is, but note the positive divergence starts at the same place.

 FB 5 min trend, again the positive divergence starts at the same place and sees a stronger positive divergence as price moves lower which allows smart money to accumulate in bigger size at better prices. We used upside head fake moves to accumulate short positions from March-May 1, it's no different.

 The 2 min chart shows more detail, negative divergences at head fake upside moves that quickly fail, the positive divergence again stats at the same place/time

Intraday 1 min, negative divergence on the open sending FB lower, a positive divergence at the volume spike mentioned.


Just look at all of this sell-side volume that can be accumulated, yet FB has barely moved...