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Facebook Turns the Corner
Facebook is turning the corner. Back in mid-November, I wrote about Facebook (FB), in Chart of the Day, because of the crucial point its stock was at. So I wanted to revisit this chart so you can see what has transpired since then.
In that mid-November article, I talked about how Facebook was likely about to turn upward. It had come down from a P/E that was well above 100 down to a forward P/E at the time of roughly 36.
While this is far from cheap (and there are other companies I like better), I felt that investors might begin to snap it up soon.
The first thing that tipped me off to this was the divergence in the RSI (Relative Strength Index) and MACD (moving average convergence divergence) that happened in the month of August. Let’s take a look below.
Facebook: Still Somewhat Expensive But Trending Higher
Above you’ll see the red, downward sloped line in August that emphasizes the downward action in Facebook’s stock price. However, you’ll notice that the RSI and MACD began to firm up and by the end of the month the pair produced its first divergence.
Divergences don’t mean “buy.” But they do mean to watch for a turnaround that could be coming.
Then around October 22 and November 12, FB began to form some higher lows. This is the first time that it had done this since it’s been public. So it was worth paying attention to.
In that mid-November article, I talked about how it was possible that Facebook would hold support because the MACD was coming above the zero line and the RSI continued to strengthen.
Sure enough, it not only held, but then busted through its horizontal resistance zone too.
With all of this combined, I believe it’s safe to say that Facebook has turned a corner. So upon the next pullback, those that are willing to buy Facebook at still an expensive fundamental valuation can buy the pullbacks.
Have a nice day!
Sean Hyman
Other Posts from the Author
- Real Alternatives to Bitcoin - April 30th, 2013
- Be Your Own Bank 365 Days a Year - April 25th, 2013
- A Silver Lining That Could Double Your Money - April 15th, 2013
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