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TCI Analysis on Facebook Share: When a Bubble Crashes a new Trading Opportunity Arise..

During May 2012 Facebook entered the Nasdaq by pricing its IPO at $38 per share. At the end of July 2012 Facebook share was traded at about $30, and today it is traded between $19 and $20. But why did Facebook share crashed like that? Is it because Goldman Sachs and other Institutional investors are selling their shares? No, the real reason of a 50% stock slump is based always upon fundamental factors. At the end of July Facebook reported a growth slowdown without even eassing worries about future reports. But let's see some important fundamental figures about Facebook.

Some Important Facebook Figures 

∟ Total Revenue and Net Income: Sales 4,33 billion USD, EBITA=1.07 billion USD and net income about 0.77 billion USD.

∟ Important Ratios, Price / Sales=9.3, Trailing P/E=67.06, Forward P/E=30.76, Price/Book=3.12

∟ Cash and Debt: Cash 10.2 billion USD and debt 0.7 billion USD

Facebook Market Capitalization: 41.52 billion USD (Facebook share price at about $19.70)

(source: Yahoo Finance)

Facebook reminds us the story of the .coms shares in the late '90s. High expectations and weak fundamentals sooner or later are forming great bubbles. So Facebook bubble eventually has crashed. This means bad news for Facebook existing Investors but maybe it means a trading opportunity for the rest.

The 3rd Largest IPO in US history

Facebook's IPO raised $16 billion, and it was the 3d largest IPO in US history. The largest US IPO raised $19.7 billion (VISA) in 2008, and the second largest US IPO raised $18.1 billion (automaker General Motors) in 2010.

 

Facebook Price Chart

In the following chart we may observe the course of Facebook Stock since its 1st day of trading (High, Low, Close and Volume)

Facebook Chart

Fundamentally and Strategic speaking, Facebook is still expensive, but this doesn't mean that it can't make a significant upward technical correction. The important question is when? And that is what we will try to answer using our unique TCI Indicator Analysis.


TCI Indicator Analysis on Facebook Stock (Possible turnaround at September 5th or 6th 2012)

TCI indicator is implemented on the Facebook stock and here are the results.  What is TCI ?

First of all we must consider that Facebook Stock started trading on May 2012, and certainly 69 trading days aren't enough for any reliable statistical conclusions. Although that fact, we will try to make a prediction based on other past and relative stock TCI analysis.

 

 

So if TCI is correct, we may expect a possible turnaround after 9 trading days starting from August, 23rd 2012. That means that that an upward movement may start on September 5th / 6th 2012. This is the second point that we have indicated with a red color in the following TCI data table. For all of you who believe that Facebook is a nice trading opportunity we suggest to wait some days before you buy any shares. The change of the major trend will certainly require a significant increase in daily volume activity above 40-50 million shares in the first phase of a possible upward movement.

TCI Indicator on Facebook Stock

 Facebook Social Network Profile

Facebook is the world’s greatest social network, launched in February 2004 by Mark Zuckerberg. As of June 2012, Facebook had more than 950 million active users in all over the world, half of which are using Facebook on their mobile devices. Facebook has about 140 million monthly unique U.S. visitors (Quantcast estimation, May 2011).

» The Facebook Share on Yahoo Finance

 □ Giorgos Protonotarios, for Trading Center (August 24, 2012)

 

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