FB: Hard Call

FB, its a hard call.
I was very short biased on this, but looking at both the math and the technicals, man, this is hard call!

I see FB has gapped up dramatically from not great earnings. I was tempted to jump in short on this in the morning. But in looking at the math, the chart and the technicals I will likely wait before making any determination of what to do with this stock.

Let's review:


From here, we can see, FB is hard into the negative growth. That is 3 stocks that I am aware of that have now reverted to negative growth, those being:
NFLX
PYPAL
FB

Any example of an over-reaction that put things into negative growth was the COVID selling panic.

FB was dumped super hard. Let's review my Z-Score indicator on the 1 hour chart from the period of Jan 21 through till Feb 9:


The green lines show where buy signals were triggered. Buy signals are triggered when a stock deviates more than -2.5 standard deviations away from its average trading range.
We can see, when these were signaled, there was little to no buying and this just kept tanking.
This is significant because a stock will generally not deviate more than -3 below or +3 Standard deviations above or below their average (or in the case of TSLA, 4) without huge pullback. This just dropped with little to no pull back and this is extremely abnormal for any stock.

So what does it mean?

When this happens and when something goes into the negative growth, the question becomes "What is going on?"
We have to ask ourselves why are we seeing a massive exodus of investors from this stock? Has something fundamentally changed?
The best example would be NKLA, when their fraud was discovered, it just tanked and still has not recovered.
Another would be PTON, when they were discovered to be lying to investors, it tanked and still has not recovered.

So, we need to ask ourselves, has FB done something or changed something that fundamental makes their business strategy not viable? Because the behaviour that is being displayed is a dump. This is stuff that I have seen from corporations like PTON and NKLA. Its beyond a regression to the mean and people have jumped ship.
It is possible that this was an overaction to something. I see over-reactions frequently in BA. But not to this extent.

So should you buy?
Yeah sure, if you believe in FB and you believe it has solid fundamentals, then sure. Mathmatically, this is sort of a great price for the stock.
But let's look more into this:

Daily

- RSI oversold on the daily
- Z Score is sitting at -2.26 which is extremely low for a daily chart indicating a need for upside movement

Hourly


- RSI is now oversold
- Z-Score has normalized to neutral with the gap up. FB is now trading at its hourly mean indicating possible movement in either direction and a stable price

Daily Trendline:


- There is a trendline support that FB made contact with today.

Verdict:
- Technically and mathematically this needs to bounce. Even with the gap up on earnings release, this needs a bounce desperately.
- If this sells more, which I think the verdict is most think it will, something may be wrong with FB fundamentally. This seems beyond normal. Now FB has had this kinds of pull backs before, and this could just be an over-reaction at the end of the day to the current economic climate. But it really seems beyond what I would normally expect to see.


Just my thoughts!
Not financial advice!

Trade safe everyone!