Facebook Stock Consolidates In Friday's Choppy Market: What's Next?

Facebook Inc FB came under fire again on Thursday when the Federal Trade Commission said it had made “misleading claims” to explain why it had disabled the accounts of a number of New York University researchers who had been looking into Facebook’s political ads. The social media giant had initially said on Tuesday it had disabled the accounts over privacy concerns.

Traders and investors have become used to the FTC and other government bodies in the U.S. and globally scrutinizing Facebook. The FTC sued Facebook separately last December for allegedly violating anti-trust law but later dismissed the claim.

Facebook’s stock typically hasn’t reacted to the investigations and on Friday looked to be consolidating in a healthy pattern.

See Also: How to Buy Facebook Stock: Outlook & Where To Buy

The Facebook Chart: Facebook had a choppy start to the day, surpassing Thursday’s high-of-day before trading down slightly. The stock had retraced more than 7% following the company’s second-quarter earnings print before rebounding almost 5% this week.

The post-earnings retracement allowed Facebook to fill a gap left behind on July 23, which should give bulls more confidence going forward. Because gaps fill 90% of the time, it was likely Facebook would trade down to fill the gap between about $351 and $357. Facebook also has a small gap above at the $366 level that is likely to fill eventually.

On Friday morning, Facebook’s volume was low, indicating it's moving into a period of consolidation. At 11:30 a.m. ET only 3.42 million Facebook shares had traded hands compared to a daily 10-day average of 18.1 million.

Facebook is trading above the eight-day and 21-day exponential moving averages (EMAs) with the eight-day EMA trending above the 21-day, both of which are bullish indicators. Facebook is also trading above the 200-day simple moving average, which indicates overall sentiment in the stock is bullish.

• Bulls want to see Facebook continue to consolidate its move higher and for big bullish volume to eventually come in and pop the stock back up towards its all-time high of $377.55. If Facebook can make a new all-time high, with follow-through, it could embark on a blue sky run.
• Bears want to see selling volume come in to drive Facebook’s stock down below support at the $358.79 level which would cause the stock to lose support of the eight-day EMA. If Facebook were to lose the levels as support it could trade down toward the $349.18 mark.