Five Star Stock Watch: Facebook, Inc.

The company: Facebook, Inc.

Ticker Symbol: FB

Sector: Technology   

Industry: Internet Information Providers

Facebook, Inc. operates as a social networking company worldwide. It builds various tools that enable users to connect, share, discover and communicate with each other on mobile devices and computers. The company’s Facebook Platform is a set of development tools and application programming interfaces that enables developers to integrate with Facebook for creating social apps and web sites.

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As of December 31, 2012, it had 1.06 billion monthly active users and 618 million daily active users. The company has a strategic partnership with Trend Micro Inc. for educating and protecting users' digital lives against malicious sites and malware. Facebook, Inc. was incorporated in 2004 and is headquartered in Menlo Park, California.

Facebook could be forming a head and shoulders (H&S) pattern. Please take a look at the 1-year chart of Facebook below with my added notations:

Facebook has performed quite well over the last 5 months while creating a key level at $45 (blue). That $45 level, which has been recent support, is also the possible “neckline” for Facebook’s potentially still forming H&S pattern. Above the neckline you will notice the H&S pattern itself (pink).

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Remember, patterns such as an H&S need to confirm to have the meaning that they imply. Confirmation of the H&S would occur if the stock were to roll over and break below its $45 support. If Facebook does break that level, the stock should move lower from there. 

No matter what your strategy, or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!