Facebook – Where it is headed now?

By September 5, 2012 Chart Analysis No Comments

“The professional concerns himself with doing the right thing rather than with making money, knowing that the profit takes care of itself if the other things are attended to.” Jesse Livermore

I have been asked by several members from time to time as to where Facebook (FB) is headed. My earlier answer was $19 when FB was trading near $22. The logic given was that since FB IPO price was $38, therefore, it can fall 50% from its IPO price and therefore, Facebook could fall to $19.00. FB did fall to $19 and this level was held for few days and there was some buying. However, just now Facebook broke $19 and is headed lower. So, I am asked again as to where FB is headed now.

Any stock which makes it big move from the bottom or from the top creates its destiny as to where it will go. It is called “Initial Impulse”. Initial Impulse determines the future of a stock. In case of FB the IPO price was $38. This means FB open price on the date of IPO was $38.00. That day it made a high of $45. So the range of its move was $45-$38 = $7. This $7 figure is FB initial impulse. Any future move by FB will be determined by taking the $7 figure. Therefore, if we take the multiples of $7 such as 3 times 7 equal $21 and then subtract $21 from $45 it comes to $24.00. So one of the target for Facebook with this logic was $24.00 Since we know FB is trading below $24.00, so what will be the next level where Facebook could find support. We can take multiple of $7 again and this time we multiply by 4. So 4 times 7 equals 28. If we subtract $28 from $45 the figure comes to $17.00. This means FB is headed to $17 where it should find support.




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