Facebook Divergence Trade and Overreaction

2018年9月10日

Thesis: Facebook has experienced a near 30% drop in the last 43 days. After a big gap it became massively oversold and price action has diverged from the RSI. It is also very much below the 200 MDA. The last time is met both of these criteria were met was in March during the Cambridge Analytica bad news. Historically the RSI alone being at such oversold levels has corresponded with a great entry point.

Regardless of the fundamentals, if the trend has not reversed then this will be a safe entry point with great upside. If the trend has reversed this will still function as a good entry simply by virtue of being a strong overreaction. Alternatively, waiting for confirmation by Fisher Transformation to turn bullish could present an even less risky entry.

Timeframe / Exit: I see no value in trying to predict the time-frame or exit preemptively, but rather to wait for the technicals to show the way. One strategy could be to wait for it to return to the magic line and then run a loose trailing stop. The alternative which I believe I will follow will simply be to wait for the RSI to reach an oversold point again.




Disclaimer: I am not a financial adviser and this is not financial advice. Trade at your own risk.

2018年9月11日

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