Facebook Stock Reacts To This Bearish Pattern Amid Nasdaq Weakness: What's Next

Facebook, Inc. FB was trading down more than 3.75% lower on Tuesday and briefly fell through a key support level at $339.92 before bouncing up slightly. The entire tech sector was taking a beating with the Nasdaq plummeting over 3.84% in the early afternoon.

See Also: Tech Sector Leads Tuesday Market Sell-Off: What You Need To Know

The Facebook Chart: Between Sept. 10 and 22, Facebook lost more than 11% of its value before bouncing up slightly between Sept. 23 and 27. The fall combined with the bounce set Facebook into a bear flag pattern on the daily chart. When the stock failed to regain the eight-day exponential moving average as support on Monday, Facebook reacted to the pattern.

Facebook’s relative strength index was nearing 33%, which is close to the oversold zone. When a stock’s RSI nears or exceeds the 30% level, it is a buy signal for technical traders. When the stock’s RSI dropped to 30% on Sept. 22, the share price bounced up 4% higher over the three trading days that followed.

On Monday, Facebook looked to be printing a big bearish marubozu candle on the daily chart. The candle indicates that lower prices may be in the cards for Wednesday. If the stock is able to bounce up and close the trading day above the $342 level, it would give the candle enough of a lower wick to indicate there is demand below the level.

Facebook is trading below the eight-day and 21-day EMAs with the eight-day EMA trending below the 21-day, both of which are bearish indicators. The stock is trading above the 200-day simple moving average by about 8%, which indicates overall sentiment is bullish.

• Bulls want to see big bullish volume come in and pop Facebook back up over the $349 level, which would give the stock the ability to regain the eight-day EMA. If Facebook’s stock can regain the levels as support, it could trade back up toward $358.
• Bears want to see big bearish volume drop Facebook back down below the $339 level. If the stock loses the area as support it could fall toward $333.

Photo: Alex Haney via Unsplash