Technical analysis of FB
FB, the representative CFD based on Facebook, Inc’s shares, has moved up since last week as traders expect a very positive result from tomorrow’s earnings report. Tech shares in general have been spurred upward over the last week as various large companies reported strong growth in profits and new users. Today’s technical analysis of FB looks at the four-hour chart ahead of tomorrow’s release after hours.
The estimate of Facebook’s price to earnings ratio (‘PE’) for 2020 is about 29.5, making it among the relatively less overvalued blue chip tech shares by this measure. PE is projected to drop to about 26 this year. Earnings per share (‘EPS’) were somewhat mixed in 2020 overall, with a negative surprise in Q1 at $1.71, missing the consensus by 2c, but recovery beyond the pre-covid figure in the third quarter at $2.71.
On the chart itself, the latest high around $288 is a possible resistance. Above this, high resistance from the daily chart is the next key psychological area around $300. Low support here seems to be around $250, a zone which has been tested unsuccessfully twice since the middle of the third quarter of 2020.
Technical indicators on FB H4
Moving averages give a weak sell signal. While the 50, 100 and 200 SMAs are successively below slower lines, they are all beneath the price. The latter surged above all three moving averages last week and none of them gave significant resistance. The 200 SMA is the first important area from moving averages in view as a support this week.
While the slow stochastic (15, 5, 5) prints a clear overbought signal at around 87, there is no sign of buying saturation from Bollinger Bands (50, 0, 2). As is typical for a CFD on an individual share, buying volume dominates selling.
Price action and Fibonacci
Strong gains and a gap up from 19 to 20 January after the failed attempt to push below $250 seem to confirm this area’s importance as a zone of support in addition to the advent of strong buying demand ahead of tomorrow’s earnings report. On the other hand, momentum ran out just below December’s high of $280. If the consensus for tomorrow’s EPS is accurate, one might favour more gains later in the week based on price action.
The lower zone, 61.8%, of the weekly Fibonacci fan could be a noteworthy support over the next few sessions, while to the upside the equivalent 50% area around $300 strengthens this zone as a potential resistance. Furthermore, the 100% daily Fibonacci retracement, i.e. full retracement of all losses since 2 September 2020, is in confluence with the latter area of the fan. Before this, though, the 61.8% retracement seems to be a resistance that might require significant buying volume to be overcome.
Technical analysis of FB: summary
Facebook is expected to release its earnings report for Q4 2020 tomorrow, 27 January, after hours. The consensus EPS is currently $3.24 against Q4 2019’s $2.56.
TA overall suggests scope for FB to continue making gains over the next few weeks. However, the apparent strength of near-term resistance around the 61.8% daily Fibonacci retracement combined with an overbought stochastic suggest that buying in here with earnings uncertain is a significant risk.
Thank you for reading Exness Education’s technical analysis of FB! Please join us again on Thursday for more analysis of MCD around the company’s earnings report. To request a symbol for analysis here, simply leave a comment below any of Exness’ analytical posts on Facebook.