Facebook (FB) shares made a series of higher lows in May and June above horizontal resistance in the $155 area, forming a triangle pattern on the daily chart. In July, they broke above triangle resistance and rallied up to the $175 level. This month the stock has been consolidating by making a series of lower highs above horizontal support forming a second triangle pattern.
This smaller fractal-like triangle is a mirror image of the larger triangle, and its downside price target projects back to the $155 resistance level of the first triangle.
In Friday’s session, Facebook closed near its low and just above the current triangle support line. A break below this level projects a downside price target measured by taking the height of the triangle and subtracting it from the support level. It would take the stock back through the rising 50 day moving average and return it to the resistance area of the first triangle.
Moving average convergence/divergence is tracking lower and Chaikin money flow is in negative territory, reflecting the fragile technical condition of the stock. Facebook looks like it is headed for a breakdown.
(This article appeared today on RealMoneyPro.com)