Facebook (NASDAQ:FB) is beginning to look vulnerable to further downside. Last week, the stock pierced a key trendline that links the September/November lows. This week, shares are moving back below this key level, and at midday, FB has dipped to fresh December lows. Versus the Nasdaq 100, which is just pennies away from this month’s peak, this divergent action is notable.
Despite this week’s soft action, FB is working on its third straight month of trading inside the September range. This sideways consolidation followed a 121% gain off the March lows. Is this pattern simply a rest before a fresh rally leg? Or, is it a signal that a significant top is in?
We are expecting a deeper pullback before a new bull leg begins. The $245.00 to $235.00 area is a major support zone. This area includes the late July earnings inspired breakout gap, the September low as well as an upward sloping 200-day moving average.
Note: We are long FB in some managed accounts.
You can read Gary S. Morrow's original post here.