Facebook shares have been climbing steadily, staying inside a rising channel pattern on its daily time frame. However, it looks like the latest rally could be cut short since a reversal candlestick or doji can be seen around the top of the channel.
This could lead to a selloff back to the channel support at the $90/share level or at least until the middle at the $100 psychological floor. Facebook shares are also starting to fill the previous gap as profit-taking might be happening.
Stochastic is heading down from the overbought zone, which means that buyers are taking a break and allowing sellers to take it from here. Similarly, RSI is on the move down and indicating a return in selling pressure. The 100 SMA is still above the longer-term 200 SMA, though, which suggests that the longer-term uptrend would stay intact.
Facebook Shares Outlook
Apart from overall risk aversion weighing on stock market gains, another reason that pushed Facebook shares to close lower on Monday was the company’s plan to appeal a decision ordering the social media website to suspend tracking users’ online activities in Belgium.
Regulators are seeking to fine Facebook $269,000 a day if it does stop tracking users who do not have an account on Facebook.com, as it has been tracking users’ browsers after they visit the Facebook website or click on a “like” button on another website.
Even so, stock analysts have retained their buy rating for Facebook shares due to the company’s strong fundamentals. The recent court decision could simply prove to be a short-term roadblock to the rally, as investors are likely to pay close attention to the company’s robust revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, growth in earnings per share and expanding profit margins.
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