Whereas each main index and most shares are making new all-time highs, Fb (NASDAQ:) inventory has thus far not joined the celebration. Do you know it topped August final 12 months? Therefore, it’s truthful to ask with FB underperforming, “did it put in a long-term prime?” Right here, I take advantage of the Elliott Wave Precept (EWP) to evaluate if so.
First, I wish to draw your consideration to FB’s final rally from the June low to its ATH. It bottomed proper within the ideally suited (crimson) intermediate-degree wave-iv goal zone. It then rallied in a basic Fibonacci-based five-wave, impulse, sample: (inexperienced) minor wave-3 was virtually precisely 1.23x wave-1, measured from wave-2. Wave-4 then bottomed virtually on the 0.618x extension, and wave-5 prolonged to almost exactly the 1.764x Fib-extension at $303.43. When 3rd waves don’t attain their typical goal zone of 1.382-1.618x 1, the fifth wave will most frequently need to do the heavy lifting: prolong.
FB each day candlestick chart with technical indicators and most well-liked Elliott Wave rely into August prime:
Thus, so far, so good. Since the ATH, FB dropped in what, in my opinion, counts best as five (purple) waves down. Since its September low, it has then advanced in an overlapping fashion to its late-October high. Compare that advance to the clean, non-overlapping impulse pattern I just described, and it is most likely that the recent rally was corrective: a B-wave. Corrections are always made up of at least three waves: A-B-C. Thus if (teal) wave-A and -B completed, then wave-C to lower prices -ideally between $236-198- is now underway. A close below $255 will go a long way to confirm this thesis, with full confirmation on a break below the September low.
Facebook’s stock is below its declining 20-day and 50-day Simple Moving Averages (SMAs) from a technical perspective. Thus, it is, in my book, in short- to intermediate-term downtrends. Since it is still above its rising 200-d SMA, I consider it even in a long-term uptrend. But a close below it will further help confirm the Bearish thesis. Besides, all other technical indicators are also trending down: weakening.
Zooming out, the weekly chart below shows FB’s price action since its IPO. My EWP count shows FB put in a (blue) Primary-III top mid-2018. Then, it completed a complicated primary wave-IV March 2020 in the form of a running flat. Please see here for a extra detailed clarification of EWP patterns. Bear in mind, corrections are all the time no less than three waves!
Right here, wave-a was the 2018 low, wave-b the 2019 excessive (the place b=a), and wave-c of IV then stopped March 2020 simply above the wave-a low. That triggered primary-IV to retrace virtually exactly 38.2% of wave-III. A basic and typical 4th wave retrace degree. Since that notorious low, FB has rallied in 5 waves up, as I confirmed in some element earlier.
FB weekly candlestick chart with technical indicators and most well-liked Elliott Wave rely since its IPO:
The weekly chart and EWP count suggest the August 2020 high was all of Primary-V of Cycle-1, and FB is about to correct most of its eight-year-long rally: with a move back to ideally $75-115 for Cycle-2, but possibly much lower. Given FB has lost 12% since its ATH, while the has added around 16% during that time, I find FB a weak, underperforming asset with a lot of downside potential and, thus, I avoided it for now. The only way for the bulls to avoid such catastrophe is to hold the $236-198 region and rally price above the ATH. Then, FB will have many months of good times ahead.