This is an update on the very limited data so far available on price forecasts for Facebook (FB) stock derived from the self-protective hedging activities necessary to market-makers.
These observations are simply a report of what other well-informed and highly motivated investment professionals are apparently thinking now in comparison to what they have thought daily through the past month. This report is not intended to advocate any long-term value posture, it merely states how thinking is developing among influential players in the stock.
This chart plots the forecast price ranges implied by their hedging actions as the vertical bars, with the end of day market quotes as the heavy dots within the bars.
click images to enlarge
The forecast ranges have tended to move in sympathy with the market quotes, keeping a rough balance of about twice as much upside prospect as potential drawdown exposure. This reflects FB's newness to organized markets.
More seasoned stocks, as illustrated by Apple (AAPL) in our earlier article Behavioral Analysis of Coming Facebook Prices, tend to see price range expectations move more slowly than market quotes, so the upside and downside prospects change in time.
These imbalances between potential risk and reward are often useful indications of future near-term price trends. But for FB, there is not enough evidence yet to justify any meaningful comments.
The measure we use to track such imbalances is the Range Index, which in percentage terms, tells what proportion of the forecast range lies between the bottom of the range and the current market quote.
As of end of day Thursday, 6/28/12, the price of $31.36 was 31% above the range of $27.80 to $37.02. Those prices are contained in a small table in the upper right corner of the chart above.
The resulting Range Index of 31 happens to be the lowest seen to date in the 23 days of history available for FB. The highest was 40, on 6/18/12, when coincidentally, the price was almost identical to today's at $31.41. But so far, these differences have yet to provide any useful meaning.
Perhaps more interesting (but maybe not terribly significant) is that the forecast ranges have stopped trending upward and are easing back down a bit. FB's price has continued to remain slightly lower today (off 7/10 of a percent as of this writing) in a market atmosphere where the Nasdaq 100 index (NDX) is up 2 1/2 percent.
Technical analysts (and I am not one) like to look at history and infer "resistance points" from similar behaviors. The big difference in what we offer is that each day's analysis we provide is an examination of the actions of market participants in anticipation of what they believe may be coming next.
In short, it is a look forward, not a look backward in time. If there is any usefulness in contemplating the trends, historically, of these forward-looking price ranges, then they may sense a dulling of recent optimism for FB. We merely observe that the upward trend, for the present, has been interrupted.
To put Facebook's present expectations in perspective, we offer the same current appraisals for other Internet-centric stocks, in terms of their price upside to downside prospects, as seen by market-makers through their hedging actions. FB is at point .