But FB is always a fun chart to look at, so let's see how things have changed since the last time I wrote about it.
FB is in a sideways trend. FB has always been in a sideways trend except for the first two months after it went public a bit less than a year ago.
There have been two sideways trends, two "orbits", as I wrote in October 2012, the last time I discussed Facebook, in my posting, "FB: A gap, but not a quantum leap".
FB is trading in the upper orbit, as it has been since I made that post. The sideways movement's high is $32.51, and it will take a break above that level to set a clear higher high, a pre-requisite for an uptrend.
The 20-day price channel will reset on Friday at whatever Thursday's high is -- with two hours plus change before the closing bell it stands at $28.84. A break above the new 20-day channel boundary would create a fresh trading signal.
With the sideways trend high nearly 13% above that point, it is a trade I would certainly consider taking, especially given the hedging opportunities provided by FB's liquidity.
However, I've added some tools since my last look at FB. How does the stock fare when subjected to odds analysis?
FB has completed five breakouts to the upside since going public. Only one of those was profitable, for a yield of 8%. Four were unprofitable, for an average loss of 9.9%.
The nearer-term results can be analyzed two ways.
One is to consider the jump from the lower orbit to the higher, which began Nov. 11, 2012 from $18.87, to be the beginning of a rather sketchy uptrend.
From that point FB has completed two upside breakouts, one successful for a 8% yield and one failed for a 2.3% loss.
Another is to consider the beginning of the sideways trend to be Dec. 28, 2012 from $25.15.
That cuts out the successful breakout and leaves only one failed breakout, for a 2.3% loss.
FB fails my odds analysis, and so although it might look like a trade on the chart, it will be screened from consideration in the early stage of analysis.
Without a doubt Facebook is a fascinating story stock. It is ubiquitous. And it has made a profit in each of the four quarters that it has reported.
True, return on equity is only about 1%, although debt is reasonably low, at 20% of equity. Institutions own only 47% of shares. The price has been bid to very high levels. It takes $12.07 in shares to control a dollar in sales.
The greater part of income comes from ads, and the major storyline is whether Facebook can serve up appropriate ads that won't drive away customers. I'm 67 years old, and Facebook continually serves me up ads for coffins. I find that to be a bit irritating.
Bottom line: FB has failed the odds test, but it can turn that around fairly easily, at least for the short-term numbers that I emphasize. A fresh zig-zagging uptrend with several successful breakouts would turn the odds around and make FB a potential bull play. It's not there yet.
References
My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.
At several points in my analysis I use the number 68.2%. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.
Disclaimer
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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