For US markets it’s another busy week of earnings reports when over 140 of the S&P 500 companies will be reporting, but perhaps nothing is likely to eclipse last week’s dramatic collapse of Facebook which recorded the biggest one day loss ever, as the share price fell by almost 20% and wiping $119 billion dollars off the value of the company. No other company in the history of the market has ever recorded a loss of over $100 billion in one day, although several have come close in recent times, most notably Intel and Microsoft back in 2000 which in comparative financial terms of equivalent value might well be considered even more dramatic.
From a volume price analysis perspective the gap down move was associated with extreme volume which dwarfs the profile on the chart and merely confirms the heavy and sustained selling of the stock, which was repeated to a lesser degree on Friday with further strong selling under the wide spread down candle. Here the stock opened gapped up only to close and end the week down near the lows of both days at $174.89. As always after such a dramatic move it is easy to jump on the shorting band wagon, but the old saying ‘gaps get filled’ spring instantly to mind, and whilst it is unlikely the stock price will spring back instantly, what is more likely to follow now is a congestion phase to begin building in this level where further selling is then absorbed before a reversal takes place in the short to medium term. So for Facebook we can expect a period of volatility, sideways price action, and accumulation on good volume as further selling is absorbed, before the recovery starts in earnest.
By Anna Coulling
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