Is Facebook (FB) a buy or a sell? It depends. (May 13, 2019)


I want to look at Facebook ( NASDAQ: FB ) today. This stock is still in an uptrend; a nice 200-day crossover in early April. Then the company reports earnings, gaps up, almost hits 200.00 and then is now falling back here. The question is, in light of everything else, the way this is falling is Facebook ( NASDAQ: FB ) a buy or is it a sell? Should you get out now before the stock falls below the 50-day moving average and kind of does what so many other stocks are doing?

I would say, the short answer, at least in my book, would be no, don’t sell now. If you are long what you should be doing is saying, “Why the heck am I still long?” When, if you bought here on earnings the stock has fallen plenty, 8 percent since the top, so you held this all the way? That didn’t turn out really well for you did it? If you are still long because you bought somewhere back here then the question is, Okay, well wait a minute, the stock gapped up on earnings; the stock gapped up almost 8 percent and then started selling off. So why didn’t I sell any here on the way down?

My point is, actually, you shouldn’t be long Facebook ( NASDAQ: FB ) right now; I have just kind of laid it out for you, you shouldn’t be long Facebook ( NASDAQ: FB ). If you are, honestly, I can’t help you, but watch the rest of the video. Let’s assume that you are not long Facebook ( NASDAQ: FB ) and you are wondering what to do.

This is what I would suggest: I would not be buying this stock now, but there is more; I wouldn’t be buying this stock right now. Because everybody who bought in this red box is in the red; they are upside down for a reason. Everybody up here is down and in this nuts market you are going to see a lot of selling pressure here. So this is not the time to be buying this stock, because even if it does rebound a bit tomorrow, what’s the upside? What we really need to see is, we need to see the stock trade sideways for a longer period of time before taking a stab at it.

You want to think about it this way, when you are buying a stock don’t just be thinking how far down can it go because I need to put my stop in place? That’s a good thing to think about but you need to also be thinking, how far up can it go if I am buying here? Because I am putting my money to work, I am exchanging my hard earned dollars for this ticker, so what’s my reward? What’s the likelihood that I am going to get a good reward? That really depends on what the chart is and how heavy it is. How heavy is the stock? In this box here, that’s a lot of heaviness.

And so I am saying if you are buying the stock right now, even if the stock does rebound, you don’t really stand much of a chance of seeing the stock just rocket up above 200.00. What could possibly cause that? I don’t know what the answer to that is but I just think there is a much greater likelihood that if the stock does bounce it is going to kind of be farting around here for a while. So you have exchanged your money for stock and now you have got a stock, that best-case scenario, isn’t really paying you off. It’s not costing you money but it’s not paying you off either.

What I would, instead, insist on is the stock actually come down and test the 50-day moving average. Right now it is 2.5 percent above it. I would require the stock to get within 1 percent of the 50-day moving average, hopefully, even touch it. Only then would I consider buying the stock. At that point, I would be able to keep a very, VERY tight stop and it would make me feel a LITTLE bit better about buying a stock that is still probably pretty heavy; but at least I am buying it RIGHT at the correct point that gives me an opportunity to risk just a very, very small amount of money.

When I am in that situation where I am risking a very, very small amount of money I can stand to be patient and wait for the stock to move. So I am saying, look to buy Facebook ( NASDAQ: FB ) but just not yet. Anything can happen, and by the way, if it falls below the 50, definitely don’t buy Facebook ( NASDAQ: FB ).

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