(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Facebook Inc. (FB) has had a stellar run over the past 52 weeks, with a stock that has soared by nearly 60 percent. The social media giant appears to be picking up right where it left off in 2017, and now seems to be breaking out on a technical basis. The breakout could send shares higher to all-time highs, and perhaps on its way to the next psychological stop, which is 10 percent higher, at $200.
On a technical basis, shares of Facebook have been stuck in a trading range between $175 and $185 since October 27, 2017. Since November 28, Facebook stock has been trending lower. But on January 2, the stock appears to have finally broken out of that trend.
The chart above shows the breakout that occurred on January 2, with the stock lifting above the recent downtrend. That breakout sets up one final test at a technical resistance at $184.50.
Should the stock be able to rise above that price, it clears the path for a move higher by 10 percent. It seems likely that this time, Facebook will be able to break through based on other indicators.
The next chart shows that trading volume for Facebook stock was steadily declining since the price peaked on November 28. But that trend has started turning higher in recent trading sessions.
Rising volume would indicate an increased level of interest in the stock, and that could be a sign of new buyers flocking to the name. (See also: Why Facebook, Netflix Are Best FAANG Stocks In January.)
The relative strength index (RSI) may also be turning higher, and would be another bullish technical indicator. The RSI peaked back in May 2017, when the stock was trading near $152. Facebook subsequently went on to trade sideways until the beginning of July, then rallied by 18 percent to $175.
Each time the RSI has peaked since May, it has led to the stock price trading sideways, followed by a sharp rise higher. The RSI last peaked in late-November; it now appears the RSI is beginning to rise again, and that could point to Facebook's stock price increasing as well.
The three technical indicators are pointing to positive momentum for shares of Facebook starting off 2018. But with earnings season fast approaching, the fundamentals will need to continue to support any technical breakout.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.