Facebook stock prices have been moving sideways for nearly a month already, as traders try to figure out the direction for the online company. The price has broken below the 50 SMA (simple moving average) recently, indicating that a downtrend is in the cards.
A break below the current consolidation pattern could mean more losses for Facebook stock, as it might form a head and shoulders pattern. This is a classic reversal signal in financial markets, indicating that Facebook stock price could eventually trade below the 200 SMA.
Facebook Stock Price Forecast
Take note that the head and shoulders chart pattern is roughly 20 points in height, which means that the resulting selloff could be of the same size. Sentiment for the company has turned sour after Facebook acquired a virtual reality company earlier this year.
On the other hand, an upside break from the current consolidation pattern and the 100 SMA could mean more gains for Facebook stock, possibly until the previous highs around $72.50. Analysts have marked Facebook as a “hold” in terms of stock signals.
Take note that the company’s debt-to-equity ratio is low but is currently higher than the industry average. In addition, revenue growth is also higher than the industry average. Strong earnings growth have driven Facebook stock prices for the most part of 2013 and could continue to do so for the rest of this year.
The upcoming IPO of Alibaba could take the limelight and demand away from Facebook though, as this Chinese online retailer is set to take the world by storm. Despite that, Facebook prices could continue to draw support from the company’s recently announced mobile ad platform. The Facebook Audience Network could allow the company to take advantage of mobile ad efforts in properties it doesn’t control.
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