Friday, June 15, 2012

FB pierces breakout level

Two weeks ago I analyzed Facebook Inc. (FB) as a potential trade like any other, rather than an OMG! IPO!! Get rich QUICK!!! Like!!!!! form of market silliness.

In my analysis -- you can read it here -- I identified the $30 level as a breakout point that would suggest a reversal of the downtrend, an identified a couple of higher levels for more cautious traders.

Today, in the last 5 minutes before the close, FB began a rapid rise and spiked up to $30.10 at 3:59 p.m. Eastern. It then immediately pulled back to below $30 for a couple of minutes, and then settled in to after-hours trading where $30, in the very, very near term, was acting as a support level.

The price spike came on a volume surge to 1.6 million in that last minute of trading, compared to 94,000 in the minute an hour earlier.

Falling implied volatility can sometimes be a forecast for rising prices, and that has proved to be the case with FB. I noted the rising IV in posting on June 7.

Obviously, whether today's peak was an anomaly or a turning point depends upon what happens next. Market analysis is always, at its core, an exercise in hindsight.

However, I'm putting a "Keep an eye on FB" notation on my To Do list for the week ahead.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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