FB Update

In yesterday's FB update I said...

"I closed a call position in anticipation of a pullback, I haven't seen the pullback that I would like to see to re-enter a new position. In my opinion a position must offer high probabilities, low risk and an excellent entry, just to say, "it is moving up" is not enough-that's chasing a trade, there has to be an edge to a new entry and thus far I haven't seen that edge and I'm starting to wonder if we will see that edge before FB perhaps takes a turn for the worse."


I'm still very interested in a FB trade as it has given some excellent signals, however which direction that trade will be is now more of a question than it has been. For those of you who may still be in the FB original long position that has done very well for us, I'm a bit dubious as to FB making significant further/stable gains.

 FB's 60 min trend since the IPO and the area where we first became interested in FB as a long trade.

 Back when we first started entering FB long, I mentioned this area as a resistance area which also would look a lot like the resistance of a large rounding base. I said to expect some volatility there so there's still a decent chance FB may just need to gather some steam in a pullback or consolidation and may try to break out above resistance which for all practical purposes would put FB in stage 2 mark up, from there FB could see even more significant gains, it all depends on how FB behaves over the coming days.

 I've been expecting a pullback, we have seen some minor pullbacks and some lateral consolidation. Yesterday FB lost some ground and today it lost some more, but it is still within the lateral consolidation zone.

 The 60 min chart that gave such a clear, great long signal for FB and has been in confirmation even since, has turned in to a relative negative divergence. At this point it is not so negative that I would abandon hope of FB breaking out above the resistance area, but it also needs to be watched carefully. I'd rather trade FB from the long side just because of mass psychology, but if this starts to deteriorate and look like a short trade will set up, I'd take that as well.

 The 15 min chart is similar to the 60 in almost every way. The silver lining here is that if the 60 min chart were seeing strong distribution, I believe this faster 15 min chart would look a lot worse than it does presently.

 Near term, the 1 min trend has been fairly accurate with positive and negative divergences calling reversals. Right now it is in a leading negative position which has seen FB drop from yesterday's resistance highs. FB intraday is still in a negative divergence.

As for stops,

 As the Trend Channel is a little tighter than I would prefer as there isn't enough daily data to construct a wider stop, I suggested yesterday this 60 min 40 bar exponential moving average, you can see it has held two pullbacks thus far.


As for the hourly Trend Channel stop, it held the FB long since FB was just below $26 and moved up to lock in gains until it was stopped out at $32.35 level. Considering FB has just been choppy and lateral since then, I do feel there's some value in the Trend Channel stop. Using this channel, you will never get out at the highs, but it will typically keep you in the trade for the trend or easy money and I have found that once it gives a stop out signal, even if there are some further gains, they are usually very volatile and short lived, besides presenting you with volatility risk there's also opportunity cost.


If you have specific questions on FB, feel free to email me.