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FB into Earnings: A Risky Bet on Upside Continuation?


What a difference a year makes, eh?

Let's notice that on Oct 24, 2012, Facebook, Inc. (FB) released better-than-expected earnings, which goosed the stock from 19.50 to 25.00 (+28%).

Forward-fast one year, and we await earnings on Oct 30 after-market close, with FB trading around 50.50, off of an Oct 21 high at 54.89!

From a pattern and momentum perspective, my sense is that FB is vulnerable either to disappointing news, or an in-line report that triggers a sell-the-news reaction.

That said, however, during the last 6 weeks or so, we have witnessed one of the great love affairs develop between The Street's research departments, retail and institutional buyers, and upside momentum, which have combined to rocket FB, after any correction of 8% to 15% since early Sept.

The current correction off of the Oct 21 high at 54.89 into today's low at 49.61 hit the 10% retracement zone so far.

Key support resides along the Aug-Oct support line, now at 48.55, which if approached, will amount to a 12% correction.

A decline to 46.80 will register a 15% pull-back from the Oct high.

A break and close beneath 46.80 could spell real trouble for FB, thereafter, as in a test of its rising 200-day EMA, now at 35.60.

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