This last rally in FB has defied all logic and probably has created the optimism necessary for a long term top to be put in place. For nothing terribly bad has to happen to FB for it to go down, rather there just has to be sellers at the margin. Stocks can and do go down on light , for the sole purpose that people don't want to sell at the lower prices and they hope for a rebound so the stays light during a long decline. So, I am suggesting that if FB can drift under $62.60, then it will be under the recent AND it will have violated the last little area of buyer who were picking up shares for about 9 days between 63-64 recently.
This double-terminal pattern is similar to the 1987-pre-crash setup, which I will reference with a link below.
Target: 56-52 area initially.
Risk: 67-68 area.
64.50 last +0.21 today
Friday, June 13, 2014 Market Closed 4:26PM EST
With this, i see also that you are fond of Tesla, but are not that picky on it - it also has a high valuation and with your charts that i follow closely, you are quite bullish on it. What is the difference in your view? They both have a lot of future developments priced in, and people here and there both argue about the abilities of the companies on upholding these in future. I find your choice a bit biased between the two - im sure you see why :)
Technically, what this pattern shows is that there is a situation where there are only sell-stops under the current price. That's what makes this pattern so powerful and why it is so similar to the 1987 crash pattern. Certainly, there needs to be something to get the ball rolling and some fear to add to the urgency to get out. The decline doesn't have to be fast, but it is how the market is set up at the moment. The 1994 Bond Market Peak was a similar pattern also, and it panned out on the downside, but it took longer to complete the decline.
Also, I did say that FB needed to go under a certain price to trigger the pattern and that is about 3% below current prices. So, really this is just a trade "setup" that hasn't triggered an entry yet.
Thanks for your great comments and if you don't mind answering: What would make you exit your long position in FB? A price drop? News? CEO trouble? Bad trends in usage?
All the best,