Facebook shares recently made a strong rally past a key area of interest at $107/share, buoyed by positive reports from the company. However, this rally stalled at $117.50/share before the stock showed signs of a pullback.
Using the Fib tool on the latest swing high and low shows that the 50% Fib coincides with the broken resistance area, which might now hold as support. A shallow pullback could last until the 38.2% Fib at $107.50/share and a larger correction could take Facebook shares down to the 61.8% Fib at $100.50/share.
The 100 SMA is below the 200 SMA for now but an upside crossover is looming. With that, the uptrend could gain traction and take price back up to the previous highs or beyond. Stochastic is already climbing out of the oversold zone, indicating that buyers are eager to charge, but RSI is still on the move down so a bit of selling pressure might still be around.
Reports that Facebook is shutting down sales of guns and marijuana through its social media platform has gained mixed reactions. Still, the company’s latest earnings report is drawing more investors to the fold, as it reported a 14% year-over-year increase in users, making it a large potential for advertising and other revenue streams.
In Q4, Facebook shares saw $5.84 billion in revenue to beat Wall Street estimates of just $5.37 billion. Earnings of 79 cents also beat forecasts of just 75 cents, signaling more upside for its shares. Also, the social media company up 6% year-to-date in a down market, it’s also up nearly 20% in the past six months vs. a double-digit decline for the S&P 500 in the same period.
Expectations of a longer period of low borrowing costs for the Fed could keep Facebook shares afloat, especially with this foreseen return in investor risk appetite owing to the bounce in oil prices and a recovery in global financial confidence.