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by Charalambos Pissouros

Facebook Hits a New High Ahead of Earnings

Facebook Inc (NASDAQ: FB) opened with a positive gap on Tuesday to hit a new all-time high near 216.30, before retreating to close the day slightly in the red. However, the stock still closed above its Monday high of 211.60. The price structure on the daily chart has been higher peaks and higher troughs since the end of March, when the share rebounded from the long-term uptrend line taken from the lows of June 2013. It is now up almost 45% after hitting a low of around 150.00 following the Cambridge Analytica scandal. Having all these in mind, we would consider the outlook to still be positive.

Today, after the US closing bell, the company reports its Q2 earnings, with its EPS expected near USD 1.75, up from USD 1.32 the same period last year. We believe that there is the likelihood for the price to trade higher in today’s session ahead of the earnings, bearing expectations for higher than last year’s prints. If the bulls are strong enough to overcome 216.30, the stock will enter unchartered territories for the third day in a row. That said, at which price the stock will open and how it will trade on Thursday will depend on the earnings. If earnings beat expectations, then Thursday could also open with a positive gap.

Turning attention to our daily momentum indicators, we see that the RSI just poked its nose above its 70 line, while the MACD remains above both its zero and trigger lines. Both these technical studies detect strong upside speed and support case for Facebook to continue conquering new highs.

On the downside, a clear dip below 211.60 could open the way for the 203.00 zone, near the inside swing peaks of the 20th and 21st of June. That said, even if this is the case, we would still see a decent chance for the bulls to take charge from that support territory. We would like to see a clear close below 203.00 before we abandon the bullish case at least in the short run.

As for the long run, as long as the stock continues to trade above the long-term uptrend line drawn from the lows of June 2013, we would consider the broader path to stay positive.


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