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The Facebook (FB) Market Lives!

02/06/14 by  
Filed under Bourbon & Bayonets

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There’s been a great deal of hoopla of late surrounding Facebook’s (NASDAQ:FB) meteoric rise on the charts – something like a Silicon Valley Beatles redux.

 Facebook's Doing The Zuckerberg Shake

 

Fact is, Facebook’s stars have, indeed, been on the rise, as the list below shows.  From a company with a very rough start out of the IPO box, FB stock has now found its perch among the biggest 20 companies in the U.S. by market cap.

Look here –

 

 FB Breaks Into Largest S&P 500 Companies

 

Now, Apple (NASDAQ:AAPL) and Exxon Mobil (NYSE:XOM) may be out of FB’s reach for the time being, but the next two numbers higher, Amazon and Oracle, could well be overtaken in the next day or two, particularly if Facebook has a day like last Thursday, when she gapped up by 16% (see chart below).

But that’s neither here nor there.  What’s truly amazing is how fast the company has cracked the elite club, after only ten years in existence as a corporate entity.

Something else.

For our part, we haven’t been shy about Facebook here at Bourbon and Bayonets.  Even in the darkest days of post-IPO ridicule, we were fans of the company’s prospects and even stuck out our necks to say that we were now in the midst of the Facebook Market.

That’s right, the bull run that began back in the spring of 2009, we said, would eventually come to be identified with Facebook stock like no other – just as the dot.com bubble and the Lehman market crash took their names from the big newsmakers of those days.

 

Are we there yet?

Haven’t heard anyone else saying it, but the sluggards will come round soon enough – we’re confident of that.  Not sure if it’s in the cards in the weeks ahead, though, as the chart below shows we could be in for some near term weakness.

 

Facebook (FB) - A Story Told in Gaps

 

The big picture, technically, is promising –

  1. Price action is above all the moving averages and all MAs are trending higher.
  2. Except for a brief dip last week, RSI and MACD (blue boxes) have been above their waterlines since early December – directly after FB’s last retracement bottom, and
  3. Volume now looks to be picking up marginally.

That’s the bull case, and it’s a strong one.  But we have our worries, too.  In particular, we fret about the gap higher last Thursday (red box, at right), a move that carried 16% and may have to be filled before the advance can continue.

 

?

But why, you ask, should there be a retracement, when last June we saw a massive runaway gap that never looked back at all (red box at left)?

Ah, Grasshopper, you ask all the right questions…

The difference between then and now is 1) volume – last summer the explosion higher was lit by a wild 8x average daily volume, and 2) moving averages – then, price was stuck between all the major MAs, while today, we’ve gotten so far extended above the moving averages that the probability of a sideways slide (at least) that allows the moving averages to catch up, far outweighs the chances of another runaway move toward $70.

 

BB02061444

 

And don’t get us wrong, friends.  We have no great love for Facebook the company, nor do we even use their product.  But we do see them as emblematic of the state of the world we live in – a greatly popular time-waster in a time of unprecedented time-wasting, that’s captured the hearts of the great unwashed while adding little real value to their lives and that may even cause them harm (see here, here and here).

Facebook also happens to be the source of a vast trove of personal information that’s accessible to both big government and the corporate elite – info that’s offered up by the damned sheep site’s users on a completely voluntary basis!

 

 FB and Police

 

Astonishing.

That said, Facebook remains the symbol of this market and, as such, could very easily pull back to fill the existing gap.  Once that’s accomplished, as we said, we should see both FB and the broader indexes resume their ascent.

As for the above mentioned corporate behemoths, Apple and Exxon, we also see strong futures – particularly for the latter.

Take a look at her chart here –

 

XOM Long Term MA

 

Exxon Mobil is offering investors an unbelievable entry point here.  She pulled back 12% in a mere month and has held nicely at long term support (411 day moving average in red circle).  Coupled with that, we see an RSI read that’s just inches from the bottom of the ocean (blue box), a place that tends to spur sharp upward adjustments.

You might do well to go out half a year with a speculative OTM CALL (95 strike).

Many happy returns,

Matt McAbby, Senior Analyst, Oakshire Financial

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Comments

3 Comments on "The Facebook (FB) Market Lives!"

  1. Fabian on Thu, 6th Feb 2014 6:29 PM 

    FB good. I followed you on this but sell puts short at one month with strike about 15% below market price. They pay well.
    I like the XOM idea will watch it and wait for a better MACD signal.

  2. Darrel Helps on Tue, 11th Feb 2014 10:57 AM 

    Excellent…

  3. Peter on Tue, 25th Feb 2014 2:02 PM 

    Shorted XOM Mar 95 puts and bought Jul 95 calls. I’ve bought back the puts and I’ll have a nice profit even if XOM drops back below 95. I am just wondering about the exit point for the calls. 110% profit already. Should I let it run?

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