FAANG stocks have borne the brunt of lofty valuations in the technology sector this week with most of them declining. Interestingly though, there have been flows in other smaller technology companies that investors are now falling in love with.
This rotation of exiting stocks that have reached a peak and reinvesting into cheaper stocks but in the same sector has been the hallmark of this year and could continue for some time. This also means the big heavyweight stocks could continue to suffer.
For example, Facebook shares have already fallen 10% this year, breaking through key daily and weekly support levels. Traders may now be eyeing the next levels of support on the monthly chart – areas which may also interest long-term buyers.
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Source: Admiral Markets MetaTrader 5, #FB, Monthly – Data range: from May 1, 2013, to Jan 14, 2021, performed on Jan 14, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The monthly chart above shows the weakness that is currently affecting Facebook’s share price. However, there is a significant zonal area of support between 225.00 and 201.00. This support zone is comprised of historical horizontal support shown by the black dotted lines, as well as the 50% – 61.8% Fibonacci retracement levels from the swing low from March 2020 to the swing high from September 2020.
A fall to these levels would result in another 10% fall in the stock price. The move lower may be quite choppy, however, as the markets expect an announcement of a significant stimulus package from incoming US president Joe Biden. These could also be interesting for longer-term investors.
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According to BarChart, analysts still remain long-term bullish on Facebook’s share price, as shown below:
Source: BarChart, January 14, 2021
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