Technically, Facebook is on its 200-day simple moving average (SMA). The SMA is a simple technical analysis tool that gives you the average price data of a stock or exchange-traded fund over a specific time period (you can tailor it to whatever time-frame you like, making it a good tool for both short-term and long-term trades). Moving averages can act as support and resistance levels for retail and institutional investors.
And there are just two directions it can go from here that will tell you whether or not FB is worth your time and your money:
- If FB crosses over its 200-day SMA: This is a bullish indicator and signals higher share prices to come.
- If FB drops below its 200-day SMA: This is a bearish indicator and signals lower share prices to come.
And this will tell you all you need to know.
One tactic I use in my charting is what I like to call “target shooting,” which is assessing a price support area where buying could start up again, causing the stock to bounce or go higher.
Looking at a basic bar chart, one can see FB is currently at $172 ($172.28 as of Monday’s close), which is the price level it tested and bounced higher from Feb. 8.
Another level one can target is an old resistance price area that a stock retraces to and tests as a new support. One can also assess which moving average(s) the stock can potentially test as support or has tested successfully in the past (discussed above). Many chart software programs or free chart sites on the Internet can provide these technical indicators.
And another option is to look into buying long-term stock options with expirations (LEAPs).
LEAPs are options with expirations as far out as two and three years. LEAPs allow you to take part in a price increase without the high costs of buying the stock outright. And since LEAPs have much longer expirations, you’ve got much more time for the trade to move in your favor.
But no matter what you do, be sure to work with a financial professional to decide if expanding your portfolio size is for you.
At the end of the day, when it comes to Facebook’s current state, my advice would be to go long term. Facebook is a social media giant that, regardless of the news surrounding it, will bounce back in regular fashion – and could make you major profits while you’re at it.
But regardless of the decision you make, never let the talking heads of the media determine what you do with your portfolio. The flashing headlines, outlandish predictions, and warnings of what’s to come are nothing but a ploy to scare you – and keep you glued to your screen.
*This has been a guest post by Money Morning*