So Facebook reported earnings last week…
(Yes, I know they changed their name to Meta. But to me, Facebook will be Facebook. Nobody calls GOOGL “Alphabet.”)
And boy, it was a stinker.
They missed on earnings, and they lost daily active users (DAU) for the first time in company history…
And that sent the stock reeling.
So far, the bleeding hasn’t stopped.
But this isn’t the first time FB has moved like this.
Back in the summer of 2018, the stock had just closed at all time highs before a massive earnings gap down.
It dropped 20%, then fell another 30% from the earnings open.
So the question becomes:
Where does it go next?
With our Trading Roadmap, we can get a feel for key areas that may bring in new buyers.
To show you the power of this analysis, let’s step through each level one by one.
The first level to have on your chart is the 1-day volume-weighted average price (VWAP) from the day after earnings.
The stock saw 188 million shares trade hands that day — the highest value we’ve seen since 2013!
Oh: and this is on a $200 stock!
We use the single-day VWAP to indicate a massive level on the daily chart for us at 241.41, so we will place that on our chart.
Note that the level also lines up with prior support — now potential resistance — and also with the volume shelf.
If we were to rally there on some news, it would be a nice place to play to the short side.
For our other levels, we will need to use weekly charts.
A ton of technical damage was done on the chart, so we need to ensure the levels we play make sense.
Here’s what the weekly chart looks like:
Next, let’s stick some of the clear support and resistance levels on there.
The main pattern seen on the chart is the very wide trading range the stock went through from 2018-2020. That was the last “cyclical” bear market for the stock.
Next, let’s add in some of that range’s internal pivot levels.
These are levels where we saw clean price responses most of the time, and can be used both to the short side and long side:
The arrows show how we’re capturing many of the internal pivots with our lines.
Next, let’s add some of the anchored vwaps (volume-weighted average prices) from key catalyst timeframes for the stock.
What you want to look for here are massive turning points for the stock, as well as events like the IPO.
You can also pull in VWAPs from the all-time highs and the pivot highs right before the big move lower…
But for now, we will focus on anchors lower than the current stock price.
The IPO VWAP is all the way down at 114, so that’s probably off the table for now.
The stock has already blown through a few other key VWAPs, but the one I’m most interested in is from the August 2015 lows. It’s been very close to marking the bottom both for the 2018 tech crash and the 2020 corona crash, so that is one area to keep an eye on.
Once we have the scaffolding in place, we can start looking for key footprints in the stock’s volume.
At PVA, our primary focus is volume by price instead of time — it’s how we can find a massive edge in the markets.
One issue with looking at volume is that it often includes lower stock prices on the stock, where much more volume was traded.
Makes sense, right? It takes more energy to move a million shares of a $200 stock vs. a $20 stock.
To cut out some of that noise, we can isolate the volume over different regimes. That way, we can really dial it in.
Since I’m seeing many responses off that August 2015 low, let’s see what our volume by price looks like from that level to the all-time highs:
This gives us a better picture.
The first thing I see is the large volume distribution from about 258 to 281. Unless every single one of those buyers closed for a loss after earnings…
That area will be an issue for bulls because any pop will give an incentive for bagholders to get out at breakeven.
Under that, there is a very large high-volume node (HVN) around 178. The upper end of that value area is around 190, an internal pivot level and the AVWAP from the Fall 2015 lows.
We want to look for levels where we see overlap.
A key pivot level, with the upper end of a multi-year value area, and a huge AVWAP that’s seen price responses before?
Yeah, that’s a level. If we managed to get to that level then I would be buying in size.
Above that, well, price is right into another key level — the prior resistance and potential support. If you were to key off the failed breakdown in May 2020 at 207, then you’ve got a decent long setup here.
On the short side, the 241 level is a very interesting level. Above that, you’ll need to trade against that large volume area from the trading range in the Fall 2020.
If you do want to buy FB stock…
Consider not going “all in.”
Instead, slowly piece into it at better prices using the levels on our Roadmap, or use some kind of dollar-cost averaging.
That way, you won’t have a depletion of psychological capital on every single red or green move.
Speaking of our roadmap — I’ve got a free training webinar that goes much deeper into how it works.
