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RSI


Buy Facebook After A Disastrous Start?

06/28/12 08:36:51 AM
by Koos van der Merwe

Is it finally time to buy after a disastrous listing?


Security:   FB
Position:   Buy

We all know what happened to the Facebook (FB) share price with its listing on NASDAQ. However, putting all that aside, is it time to have a good look at the share price and decide whether it is time to buy the share?

FIGURE 1: FACEBOOK, DAILY
Graphic provided by: AdvancedGET.
 
Figure 1 shows the opening price of Facebook at $42 on May 18 and how the price swiftly rose to $45 and then fell to a low of $38 before closing at $38.37. The low of $38 was supported by Morgan Stanley, but on May 19, the share price dropped to $34.03 and continued falling until it reached a low of $25.77 by June 5.

From that level, the share price started recovering, giving a buy signal on the JM internal band indicator on June 15 when the price was $29.63. With the relative strength index (RSI) confirming the buy signal, should we buy FB for a long-term hold?


FIGURE 2: FACEBOOK, 15-MINUTE
Graphic provided by: AIQ Systems.
 
Figure 2 is a 15-minute chart and shows how the price supported itself by moving sideways on June 21 when the market dropped strongly. The chart also shows the stock price rising strongly on June 22, opening at $31.90.

The indicators on the chart are SK-SD propriety to AIQ Systems, which is showing a buy. However, the RSI is suggesting a sell. The ParaSAR is showing strength, but with the price trading near the upper AIQ band line, a reversal could occur.

I would be a buyer of Facebook on any pullback to lower AIQ band level at $32.20 and hold for the long term, until a JM internal band sell signal is given.




Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address: petroosp@gmail.com

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