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Has Facebook Run Its Course?

Facebook held its IPO on Friday, May 18, 2012 and for quite a while had serious issues. The internet company had lost more than half its value since its initial public offering three months from its launching. Things turned around and in September 2013 Facebook began to make a comeback. We saw huge gains for the social network as stock prices tripled during 2014.

The market had traced out a five wave structure, terminating with the classical ending diagonal pattern. According to the Elliott Wave Principle, every five-wave sequence is followed by a correction in the opposite direction. Expectations are, that prices should move lower during the course of 2014 and 2015. A confirmation of this setup would be a swift crossing of the lower line of the diagonal. Prices should find support at the 61,8% Fibonacci level, which corresponds to the price territory of wave “4”.

Facebook Inc, daily chart 2

Investors should reconsider buying put options and beware of a coming bear market. If this is the correct count,  prices could all the way down to the 42 level, erasing almost half of Facebook’s value. In our Elliott Wave Patterns lesson you can see an example of a zig-zag correction after a completed five wave rally.

 



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