FB is now all about psychology they tell me. Price action yesterday was massive and volumes absolutely amazing. One thing is sure, not many anticipated this move, and FB has definitely been the top darling stock among hedge funds.

The weekly chart fell below the 50-day average yesterday. The long-term trend since 2013 is around the 100-day average (weekly) and is currently found at the 160 level. The big support from earlier this year is at 150.

The daily chart is rather extreme. The stock fell below all the major moving averages yesterday. Of course, massive damage has been done to this chart. Below are a few support levels on the daily chart worth having in mind, 170 and 160 are important levels. Note the huge volume day yesterday where 170 million shares traded.

So how did it all go so wrong so fast?

Bloomberg states four factors:

  • Breakdown in communication
  • Investors not taking FB’s hints
  • FB is intentionally overcautious
  • Things are going unexpectedly wrong

Hindsight trading is always easy, but it is worth reading the Bloomberg article explaining what went wrong and why it happened so fast. Full article here.

Source: charts by Bloomberg