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Facebook (FB): It did it again with a much bigger drop

One of our students asked a question regarding Facebook fiasco, following a disappoint earning report: "I picked FB at $172. Would love to here your comments...."

So here is my analysis.

Facebook (FB) shares dropped $41 (19%) in just a few hours on Thursday after the company released disappointing earning results.

After reaching an all-time high @ 218.62, price rolled over on Wednesday (7/25/2018) in the after hour market. The following morning on Thursday during the pre-market hour price reached a low of 169.00 before bouncing up (Image 1).

At 9:30am price opened @175.33, quickly reached a high of 180.13, testing the 200 SMA (red line) before rolling over down to 173.75. Towards the end of today's trading session, price found a base and started to move up closing at 176.26 and forming what's called a spinning top pattern. The spinning top indicates indecision.

On Friday it tried to bounce above the 200 SMA but it failed, printing a bearish engulfing and closing slightly below support @ 175.32. Friday's low at 173.11 is the next support.

Here are the things to watch for moving forward.

If price is able to move above the 200 SMA (red line) resistance line, it will test the upper resistance areas @ 187.05, the mid channel resistance trend line (Image 2), 194.99 and the 50 SMA (blue line).

After that, if price continues to hold support and move higher, it will try to fill the $40 gap that was formed overnight, testing resistance @ 202.21, 209.73 and 214.27.

BUT (and that is a huge but), there are many resistance areas to break.

On the other hand, if price is not able to push through resistance @ 180.24 and/or the 200 SMA (red line), price will rollover, testing the double support @ 169.47 (Image 3).

This area is very important as it is the bottom of the channel. If price breaks below this support, it could reverse course from it's long standing bullish trend to a bearish run.

If that happens, we are looking at a potential drop trying to fill the gap that was formed back in April 2018, down to 165.68 and 159.66. If this areas fails to hold, we are looking @ 155.06 and 150.61.

Good Trading!

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All the information shared is provided for educational purposes only. Any trades placed upon reliance of SharperTrades, LLC are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, cryptos, commodities, options, forex and other trading securities, there is also substantial risk of loss. All trading operations involve high risks of losing your entire investment. You must therefore decide your own suitability to trade. Trading results can never be guaranteed. SharperTrades, LLC is not registered as an investment adviser with any federal or state regulatory agency. This is not an offer to buy or sell stocks, cryptos, forex, futures, options, commodity interests or any other trading securities.

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