Facebook Technical Analysis – Looking lower

Facebook’s share price suffered heavy losses on Monday as a number of technology-related stocks inside the Nasdaq came under downside pressure, as the index posted its longest losing streak in over twelve weeks.

Investors and traders came to the realization that tech stocks are looking overvalued as many countries look to come out of lockdown over the coming months, as the various types of COVID-19 vaccinations are starting to yield results and make progress in bringing down global infections.

Many tech-related stay-at-home stocks, such as Facebook, have strongly benefitted from the COVID-19 lockdown. Aside from the current lofty valuations, market participants are now looking at stocks with more upside potential and links to the real global economy.

The ongoing rise in bond-yields and the reflation trade is causing a shift in market thinking amongst investors, especially towards the trades that have been working previously. The hunt for yield is now on and focused on the real economy, not the so-called stay-at-home stocks, such as Peloton, and Zoom to take but two examples.

Facebook also recently suffered from the news that the company is seeking to ban news from Australia. This has set aside fears that some governments may take on the tech platform and actively ban it.

The European Union is also looking to impose regulations on big-tech companies, such as Facebook. Should we see Facebook engulfed in legal battles it could hurt the short-term upside prospects of the social media giant.

Going back to the Nasdaq, the fate of Facebook’s share price is going to be closely linked to the performance of the leading technology index. Rising US treasury yields could well cause further losses for the Nasdaq, which in turn is likely to cause more traders to turn bearish towards Facebook’s share price.

From a technical perspective, Facebook’s stock has scope to head lower. Price action recently looked very uncomfortable around the $300.00 level, and we may see the stock test back towards the $200.00 support region before its revisits the $300.00 level again.

Facebook Short-term Technical Analysis

The four-hour time frame shows that Facebook’s stock price is trading inside a large descending triangle pattern. A break under the $245.00 level is current required to force a bearish breakout from the triangle pattern.

Given the overall size of the triangle pattern we could expect that the stock could fall towards the $200.00 support zone if a confirmed breakout under the triangle takes place.

Traders should note that the short-term trend in Facebook’s share price is bearish while the price trades beneath the $275.00 resistance level.