Trade Idea: (Longer Term) FB Follow Up

This is from an initial idea at the end of May, this follow up on May 30th, FB Trade-Idea Follow Up says,

"Yesterday I went ahead and opened a FB short equity position Trade Idea: FB (Short), today FB is down nearly -1.5%, however, much like NFLX, I think there will be another opportunity early next week if you are interested. As for the charts, not much has changed with the important ones so here's yesterday's post, FB Follow Up . FB would be another right shoulder entry like NFLX."

The important part is the numerous assets that were expected to bounce to help set up better entries on multiple assets that (more importantly) shared the same chart pattern, THE TOP OF RIGHT SHOULDER PATTERNS WITHIN A H&S TOP.

That same FB short position is still among my trading positions, at full size, down just under 4% which is well within reasonable , manageable draw-down, especially for top entry positions.

As for the update, I think FB is in an interesting position here, it looked like it wanted to run a Crazy Ivan shakeout of a small range near the top of the shoulder, but if you focus too much on the details, you miss some very important large , bearish trends.\ ESPECIALLY IF THE MARKET CONTINUES TO ERODE LIKE THIS. There are not the set-ups of swing trade/corrective short trades, these are the set-ups of major, primary market moves that in many cases look worse than anything I've seen pre-bear trend.

The major market erosion I'm talking about... I've tried not to draw on these too much as I think it's distracting and takes away from what's going on, in some cases I drew in the lows that led to the February rally/cycle and the retracement of the entire move in the QQQ/IWM. Remember, for confirmation 3C should make similar moves with price, a new high in price should see a new high in 3C.

 IWM bigger picture and Feb rally retracement, giving the IWM a large H&S-type price pattern that would be at the top of a right shoulder.

 DIA with a price pattern from about May to present that looks like a slanting H&S at the top of a right shoulder with 3C at new leading negative lows.

 The QQQ with an extreme leading negative divegrence once the Feb. range highs were crossed (around the same time the SPX crossed its 3-month range/1900).

SPY from Feb rally, the range and cross above with new leading negative lows.

There's a lot of fracturing of price in the market as well, the QQQ and IWM have one look and the DIA/SPY another, this is not common, they typically move together, but IWM and QQQ both saw stronger weakness after the February rally, retracing all or nearly all gains from the lows.

As for FB, this is a weekly chart showing the 4 stages, we were among the first to trade FB long at stage 1 when it was the most hated stock.

 RSI on a 5-day chart is also confirming a divergence at recent highs.

This is my custom cumulative volume indicator, to confirm a H&S top, as you move further to the right around where the head starts especially, volume should decline on rallies and pick up on declines in price to confirm, that's what we see here, especially from the head to the current right shoulder, this is the macro and very important trend that is telling us a lot about the condition of FB.

3C on a daily chart also shows accumulation at stage 1, confirmation at stage 2, massive distribution at stage 3 which is also in line with the kind of distribution seen in a H&S top.

 And here's a 2-day chart with less noise showing the distribution pattern so typical of a H&S top, the slanting neckline isn't a problem for the price pattern, the bigger macro trend that tells us a lot is the fact it's at the top of a right shoulder like so many other assets and averages.

 This is a 10 min 3C chart of the rounding of the right shoulder, I drew the accumulation at the neckline to form the right shoulder, the distribution at the right shoulder should be obvious,

I believe there was a small stop run/head fake on the 20th for a small Crazy Ivan at the top of the right shoulder, shaking out both sides before a conclusion of the shoulder makes sense.

 This is very small accumulation on a 3 min chart on the 20th as support is broken and supply is created (see volume), we see a small positive divegrence and the launch from there, I'd expect it to try to break above the yellow trendline around $66.50 and will put an alert there in case it does for a possible put position, however it looks like there's damage occurring fast here and it may not make it.

 The 2 min chart is already showing distribution in to the move today so it's hard to say if it will make it.

 This would be the wider move, an Ascending (bullish) triangle breakout is around that same area which may be a head fake at the top of the right shoulder as the bottom end of the small range was shaken out (stops run) on the 20th, the larger macro trend is the declining volume in to what would be the top of a right shoulder, EXACTLY what you want to see in a H&S top at this point in the pattern.

I'd consider FB for a short here, a put position above or around $66.50 and a stop could always be placed just above where there's a gap and some confirmed resistance, this could easily be positioned sized to not risk more than 2% of overall portfolio with the ability to add to the position.