The curious case of Facebook.

Although the EWI guys declared Sept 19th the top of the bull, some shares and even major indices have rallied to higher highs since.  I mentioned in my previous post that the Dow Transports were among them.  This plays into my (relatively new but getting quite a bit of positive testing) theory that wedges are 3rds or Cs.  An ending diagonal is just a special form of wedge.  The trading action since Sept 19th looks corrective (a-b-c) down into the October low and it damned sure looks motive since then.  But I believe that wedges which conform to the proportions of the ending diagonal predict that the 5th wave will be a failed 5th (or "short stroke" as I prefer to call it).

So when we see wedges we should look for a pullback and then one more stoke up before the big one happens.  In other words, 3-4-5 and then ka-boom.  And so with that lead in I present the curious case of Facebook whose share price into today's close formed an obvious large degree rising wedge.  Wow, this sure looks bullish, right?  I mean if you are Sam Collins you are probably saying "look at all that breakout strength, new high just achieved, blah blah blah".

But it does beg the question of how on Earth FB shares are going to collapse into a 4th wave of the proper size and then have one more 5 wave short stroke upwards before falling through that bottom rail never to see these heights again in our lifetimes.  It all just sounds so crazy!

But the wave count will not be mocked, it seems, because in the after hours trading, and based on literally no substantive news at all, a fly bit the horse on the ass and the horse came tumbling down like it was a NASA Antares rocket.

The AH plummet came right down to the lower rail and then bounced.  Expect a strong bounce tomorrow before Yellen speaks but then it should reverse and begin to break down.  When it goes, it should go quickly as this share price is nothing but leveraged momo trading; weak hands all. You can see that from the AH performance.  They are all ready to cut and run because these guys know it is a pump and dump and that anyone who still believes that stocks are a long term hold will get left holding an empty paper bag.