Social media giant Facebook, Inc. (FB) has lost its momentum after setting its all-time intraday high of $195.32 on Feb. 1. As a laggard since then, the stock was extremely vulnerable on the news of the Cambridge Analytica data scandal that hit on March 19.
Shares of Facebook closed Monday, April 9, at $157.93, down 10.5% year to date and deep in correction territory at 19.1% below its all-time intraday high set on Feb. 1. At its 2018 low of $149.92 set on March 28, the stock was briefly in bear market territory. This morning, Facebook shares reached as high as $159.85 in pre-market trading.
Facebook CEO Mark Zuckerberg will meet with Congress today to discuss the issues surrounding the revelation that the company allowed Cambridge Analytica to mine personal data from 87 million Facebook users. He is set to testify before the Senate Judiciary and Commerce committees on Tuesday and then before the House Energy and Commerce Committee on Wednesday. Wall Street seems to feel that Facebook users are staying engaged on the social media platform, but will institutional investors shy away from the stock?
The daily and weekly charts show how to navigate recent share price volatility. (See also: Zuckerberg: Assume Your FB Info Has Been Taken.)
The daily chart for Facebook
Facebook stock has been trading below my annual pivot of $162.65 since recovering from its 2018 low of $149.02 set on March 26. The $162.65 magnet was last tested on March 27, and the stock has moved sideways since then. Given the sideways action, the 50-day simple moving average has declined to $175.19, with the 200-day simple moving average flattening at $173.05. This puts the stock on "death cross" watch. A "death cross" occurs when the 50-day simple moving average crosses below the 200-day moving average, indicating that lower prices lie ahead. Above $162.65 are my monthly, quarterly and semiannual risky levels of $177.71, $178.69 and $182.00, respectively.
The weekly chart for Facebook
The weekly chart for Facebook is negative, with the stock below its five-week modified moving average of $168.14. The stock is well above its 200-week simple moving average at $118.38. This is also the "reversion to the mean," which has never been tested for shares of Facebook. The 12 x 3 x 3 weekly slow stochastic reading declined to 33.11 last week, down from 42.67 on March 29.
Given these charts and analysis, investors should wait to buy the stock until it declines to its "reversion to the mean" at $118.38. Investors should reduce holdings on strength to my monthly, quarterly and semiannual risky levels of $177.71, $178.69 and $182.00, respectively. (For additional reading, check out: Sequoia Buys Facebook on the Dip.)