Facebook shares have been trending higher lately, finding support around the 50 simple moving average so far. However, the stock price recently gapped below the dynamic inflection point, indicating that the recent uptrend might turn.
MACD is suggesting a pickup in selling pressure, which might last until the previous lows around $70/share. Further losses could take Facebook shares down to the 200 SMA, which is another dynamic support area.
Facebook Shares Outlook
On the other hand, a return in buying momentum might lead to a climb back to the 50 SMA and a continuation of the uptrend. This might take Facebook shares to its previous highs at $80/share and beyond.
The company’s third quarter earnings report may have been the primary reason for the gap lower, as Facebook shares dropped 6% when the report indicated that the company hasn’t made any detailed plans for the acquisition of WhatsApp. Even though Facebook showed gains in earnings per share, investors seemed disappointed that the social media company hasn’t outlined its plans to profit from the WhatsApp purchase.
A closer look at the financials indicates that WhatsApp is actually losing money, weighing further on Facebook shares. After all, the app doesn’t show ads and simply has a $0.99 subscription fee for users after a year. Apart from that, there are no major revenue sources for the platform.
Another factor that may have spurred the drop was the FOMC statement, which indicated that the Fed has no plans of hiking rates any time soon. This may have sparked weak risk sentiment among equity traders, leading to profit-taking off the recent highs in anticipation of more losses down the line. The Fed did end its QE program with the final taper of $15 billion, which indicates that there is no stimulus in the US economy right now and it might be vulnerable should a euro zone or global recession kick in.
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