Facebook, Inc. (FB) stock has acted well in recent months despite ongoing privacy investigations and could test 2018's all-time high at $219 in the third quarter. In addition, it won't take extraordinary buying power to hit new highs and head toward $250, potentially making Facebook the first FAANG play to break out in 2019. That would provide a much-needed lift to rest of this elite group, although these stocks may still struggle to hit new highs in this economic cycle.
Facebook just announced the Libra cryptocurrency initiative, in which the new digital coin will be integrated into existing customer accounts. This should give the social media giant a profitable head start on mainstreaming digital coins into traditional payment systems, an inevitable development in world banking systems in coming years. The news caught bears by surprise, lifting the stock while putting a fire under the rest of this esoteric venue.
Of course, it's popular to hate Facebook, Mark Zuckerberg, and the social monster they've created in the past decade, but active user numbers have held up well despite the long string of controversies and misfires. And unfortunately, this operation has become too big to fail in our futuristic environment, with millions of individuals and companies dependent on Facebook's interactive applications to maintain personal relationships and grow businesses.
FB Long-Term Chart (2012 – 2019)
The company came public in a highly anticipated but poorly managed initial public offering (IPO) in May 2012, hitting $45 and selling off into the upper $30s. It spent the next three months losing ground, posting an all-time low at $17.55 in September. That marked a historic buying opportunity, ahead of a bounce that stalled in the low $30s in early 2013. The stock completed a round trip into the mid-$40s in September and broke out, entering a powerful trend advance that eased into a rising channel in the first quarter of 2014.
Price action stayed within those boundaries for the next four years, limiting damage from the 2015 correction before posting an all-time high at channel resistance in July 2018. It gapped down from that peak the next day, dropping 41 points in a single session after warning about revenue growth, and broke channel support in August. Privacy issues then took center stage, adding to a steep decline that hit a two-year low at $123 in December.
The sell-off printed the first successful defense at the 50-month and 200-week exponential moving averages (EMAs) in the stock's public history, yielding a strong 2019 bounce that stalled in April. The monthly stochastic oscillator lifted out of the oversold zone at the same time, setting off a buy cycle that reached the overbought zone in April. The indicator is now showing signs of rolling over, but so far at least, it has avoided a confirmed sell signal.
FB Short-Term Chart (2016 – 2019)
The December low unfolded at the .618 Fibonacci retracement level of the 2015 into 2018 uptrend, while the rally into April 2019 stalled at the .786 retracement of the 2018 downturn. This symmetry is still in full force, with a rally above $200 opening the door to a test at the 2018 high, while a breakdown through the June low at $160 would set off a stochastic sell cycle that exposes Facebook to a test at the 2018 low.
The on-balance volume (OBV) accumulation-distribution indicator gives bulls a modest edge in this binary scenario, lifting to an all-time high in July 2018 and bottoming out at a 17-month low in November, well ahead of price. Accumulation has now resumed after a pause in May, indicating that buyers are taking the plunge despite a wall of worry that's unlikely to dissipate until after the 2020 election.
The Bottom Line
Facebook shares are under accumulation once again and could test 2018's all-time high in the coming months.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.