FB Update

I really like the trade we made in FB, we were long and making money while everyone was shorting every move higher. As you know I still feel FB has good upside potential on a stage 2 breakout in to mark up, which would be a breakout above this level...

 Above the lateral trendline.

Why?

I know this is horrible scaling, but it's the only way to show you where the 60 min FB chart started when it first went public and where it is now, a very impressive leading positive divergence. This makes FB a stage 2, mark up, trending candidate, but first it has to break above that resistance level shown on the first chart.

I don't fall in love with stocks and follow them around like a puppy dog because of past victories, I continue to watch and follow FB because of the potential seen on the chart above.

That being said, very early yesterday, to me it looked like the pop in FB intraday was forming a rounding top

It turns out my gut feeling and 3C were right...

Based on that information from early yesterday, members "could" have entered some options/puts and made some quick money, it isn't a trade I would personally take or advocate as I prefer to try to trade with the most likely, strongest trend.

In any case, I thought it best to just see what FB does on the suspected rounding top an afternoon decline as the 2, 3 and 5 min charts were pretty negative. If those charts were to gain in strength and really put in a strong showing, then maybe FB is preparing for an attempt to break out above major resistance that really lads us to the next level in the FB trade, likely an even stronger trend. Otherwise, I have to assume FB is likely to follow the path of least resistance for the majority of stocks and trade with the market (as yo know the next semi decent size move expected in the market is a pullback). I have mentioned recently that this IS NOT a stock picker's market as correlation between stocks and the market is very high, FB was on example of a stock that was immune to that as it marched higher despite what the market was doing from day to day, but we can't just make assumptions that aren't based in evidence.

So lets look at the FB evidence that has developed today and see where FB is likely going and where the opportunities are likely to be found.

This may be one of the funniest things I've seen happen in FB, as we know, the FB shorts and haters have been out in full force, it seems like yesterday some of them had enough of watching their shorts get shredded and finally decided to jump on the FB train (chasing the trade-absolutely deadly in this market).

 After pulling back (buying a pullback is a concept of technical analysis) and after breaking above "Tweezer top" resistance at the white arrow, it seems some former FB haters decided to switch sides.

Take a look at the volume on the move up early yesterday above that resistance level I just mentioned and then look at the volume on the way back down. Two things I would like you to consider, 1) human emotion-you can't really truly understand a price chart unless you can translate it in to human emotion and what happened yesterday seems to be that hesitant, and newly reformed FB haters and shorts decided to chase the move in FB higher and were promptly slapped down.  How do you think that may have influenced their attitude toward FB? Secondly, consider the role Wall Street might have (likely did) play in setting up thi little emotional roller coaster (it even looks like one) and why would they do that, how could that benefit Wall Street in the long run? I'll give you a hint, if FB is to break out to stage 2 mark up, having a healthy short presence would be most helpful in sending FB higher.

Right now, FB is in a little congestion pattern at what has this far been the only real support trend line that can be drawn.

 Here's the 5 min intraday chart which went leading negative yesterday as can be seen in yesterday's updates, suggesting the "U" shaped downside reversal. Right now as we are at an area of support, congestion is expected and thus 3C is pretty much in line short term.

 The 1 min chart's trend gives us a pretty good idea that yesterday's move up was noise, perhaps a little psychological warfare against retail traders who decided, "If you can't beat them, join them" and were promptly thrown in to the meat grinder.

 The 1 min chart close up was negative at the top yesterday, as the market looked to gap up this a.m. (as mentioned late yesterday) it appears there was some market maker accumulation for a second round of buying that gap, it's small accumulation and that was promptly sold in to with a leading negative divergence this morning, this chart also is in line as we are at the major/only support level of consequence. I expect some congestion here, I don't expect much of a tradeable move.

 The 2 min chart was leading negative (it is much clearer as it was happening yesterday) and we see the distribution of the opening gap up and an in line status now.

 The 3 min chart has a relative-nearly small leading positive divergence, this is not what I'm looking for to start a long position, I consider this more noise which we'll see in more detail soon.

 The 15 min chart is important for the next move of consequence or the next tradeable move (speaking generally of the market), I don't like how the 15 min chart has deteriorated here even more, this to me suggests FB will indeed pullback and hopefully on a pullback, gather strength for a move through resistance.


 Even the 30 min chart shows some negative relative divergences, although the round of accumulation that had me unsure of whether FB was going to try to make a breakout move, now seems to be revealed as a head fake move that may pay some dividends in future moves to the upside as tentative former shorts got burned on long trades yesterday. People take trading very personally so they'll likely have a renewed hatred for FB.

 When we look at the 60 min chart, we are looking at a different trend, just like the market averages. This appears to suggest (as of now), after a pullback, we will likely see a move to breakout to stage 2 mark up.

As for the trend channel, on a straight long, FB gained 18% (although many of you used options for far greater gains). Note where the Trend Channel stopped FB out. If you measure where the Trend Channel stopped out FB to present price, you have a 0.28% gain. This is why I take my Trend Channel stops seriously, yes there are often some slight additional gains, but the time, volatility, risk and opportunity cost are rarely worth it once the Trend Channel stops out the trade.

For now I will continue to monitor and wait on FB to show me something that makes me want to enter the trade, but in the near term I'm not expecting much on the upside and I'm not willing to short it with that 60 min positive leading divergence in effect. Patience and hopefully FB comes to us.

It seems the question of breakout or pullback is now leaning pretty solidly toward pullback which is fine, it may be the best thing for FB's longer term future.

I'll be on the sidelines for now.