Facebook's `Candlestick Hammer' Suggests the Stock Just Bottomed

(Bloomberg) -- Facebook Inc. may be done making new lows for now, or at least that’s what the charts are telling us.

The stock’s remarkable recovery on Monday, erasing a 6.5 percent drop to close 0.4 percent higher, formed what technical analysts call a candlestick hammer. This pattern generally occurs after a significant decline and usually at the end of a downtrend, suggesting that a short-term bottom may be in place.

And it’s not just the candles that are making the bulls giddy. The stock’s bounce flashed another major technical signal by keeping a five-year uptrend line intact.

As for Tuesday’s action, Facebook opened lower but has since staged another recovery. Shares are now up 0.7 percent and outperforming most large-cap technology stocks.

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