Breakout Signal on Facebook Stock – May 21, 2014

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Breakout Signal on Facebook Stock - May 21, 2014

Breakout Signal on Facebook Stock - May 21, 2014

Facebook stock prices have been consolidating for almost a couple of months already, as seen on the company share’s daily time frame. The price has been forming lower highs and higher lows, creating a symmetrical triangle or a flag pattern.

The flag formation could be a bearish one, as it comes after a quick selloff and might be a continuation signal for Facebook stock movement. However, RSI is indicating mounting buying pressure as it is moving out of the oversold area. This could be a signal for an upside break and rally for Facebook stock prices.

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Facebook Stock Forecast

An upside break from the consolidation pattern could lead to a rally up to the $72.50 price level or the highs marked in the previous quarter. On the other hand, a downside break from the symmetrical triangle pattern could mean a move of the same size as the previous selloff. This could push Facebook stock down by around $12.00.

Stock analysts have marked Facebook shares as a “buy” because of its recent acquisition of messaging platform WhatsApp. Analysts remarked that this is a multi-million dollar opportunity for the social media company, which is aiming to expand its user base and reach in the coming years.

Bear in mind that Facebook’s revenue growth exceeds the industry average of 21.3%. For the past year, revenues are up by more than 70% as the social media company invested in allowing users to create ads and sponsored posts. The company’s debt-to-ratio is low but is higher than the industry average.

Another thing to take note of though is that Facebook CFO David A. Ebersman recently sold 58,715 shares of the stock in a transaction dated last Thursday. Many interpreted this to mean that company insiders are less confident on Facebook prospects.

To contact the reporter of the story: Jonathan Millet at john@forexminute.com