During May 2012, Facebook joined the Nasdaq by pricing its IPO at $38 per share. By the end of July 2012, Facebook shares were trading around $30, and today they trade between $19 and $20. But why did Facebook's shares fall so much? Is it because Goldman Sachs and other institutional investors are selling their shares? No, the real reason for the 50% drop is always linked to fundamental factors. At the end of July, Facebook reported slower growth and did nothing to ease concerns about future results. Let’s look at some key Facebook figures.

Key Facebook Figures

∟ Total Revenue and Net Income: Sales of $4.33 billion, EBITA of $1.07 billion, and net income around $0.77 billion.

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

∟ Cash and Debt: Cash of $10.2 billion and debt of $0.7 billion.

∟ Market Capitalization: $41.52 billion (based on a share price of about $19.70).

(Source: Yahoo Finance)

Facebook’s story is similar to the .com bubble of the late ’90s. High expectations combined with weak fundamentals eventually create big bubbles. The Facebook bubble has now burst. This is bad news for current Facebook investors but might be a trading chance for others.

The 3rd Largest IPO in US History

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

Read more: Trading Signal on Facebook Share 2012

📊 Introducing the TCI Indicator on the Web

Trading Center has developed a groundbreaking technical analysis indicator called TCI. TCI analyzes multiple daily price factors—such as high, low, and close—to generate predictions about the price trend of any traded financial asset. Today, we’ll use TCI to identify the future price trend of the Nasdaq Composite, with particular focus on the upcoming time frame. First, we present a brief analysis, followed by the time frame and the historical TCI chart for the Nasdaq, dating back to 1998.

Our TCI technical analysis indicator is being introduced today for the first time on the World Wide Web—or anywhere else.

TCI on the Nasdaq Composite

It is late Sunday, May 6th, 2012, and we are set to apply TCI to the Nasdaq Composite for the period from May 7th to May 15th, 2012.

TCI Suggests the Correction Phase is Likely to Continue (Short-Term Sell/Hold)

The Nasdaq Composite has shown strength in recent months, reaching an intraday high of 3,134 points on March 27, 2012. However, a correction began last week, bringing the Nasdaq down to 2,956 points by the close on Friday, May 4th. This correction is expected to continue through May 15, 2012. While a long-term analysis of the Nasdaq will be addressed in an upcoming Trading Center report, today’s focus is strictly short-term.

Using the Trading Center Index (TCI), we can define a short-term time frame and establish two key target dates:

► Low-1: May 8 (followed by a brief upward correction)

► Low-2: May 15 (followed by a trend reversal into a bullish phase)

Based on these targets, our position remains sell/hold on the Nasdaq until May 15 or 16, 2012. After that, we anticipate a strong rebound and the return of the primary bullish trend.

It’s important to note that technical analysis can always be disrupted by unexpected short-term news, and no prediction is ever entirely risk-free.

Read more: TCI on Nasdaq Composite 2012

TradingCenter's Indicator (TCI) on the Dow Jones Industrial

Dow Jones Industrial has recently initiated a new short-term rally. The positive outcome of the Greek elections on June 17th and expectations that the Eurozone will soon offer a permanent and stable solution to the European banking crisis have renewed investor confidence. As a result, the Dow Jones Industrial Average (DJIA) closed at 12,824.39 on June 20th, 2012, significantly above its recent intraday low of 12,003.75 points recorded on June 4th, 2012. 🔗More » The Dow Jones Industrial Average

TCI in Action: Implementing the Trading Center Indicator on the Dow Jones Industrial

In the following table, you can observe the TCI in action. Point (A) marks the beginning of the current DJIA rally on June 11th, 2012. At point (A), the Dow closed at 12,411.23, which is above the 180-day Average Price of 12,403 points. This served as confirmation that a short-term rally was underway.

We have identified point (B) as the anticipated Middle Rally Top for the Dow Industrial. Point (B) falls 8 working days after June 20th, 2012, which corresponds to July 2nd, 2012.

Read more: Bullish Trend for Dow Jones Industrial

Is the Dow Jones Heading for 14,100 or 12,000?

The Current Trend

Dow Jones Industrial is found today at 13.150. The long-term trend is certainly bullish, as the US economy and corporate news are both looking well. Especially as long as unemployment is falling and technology is pushing the economy to grow more. Looking at the whole picture, it is very possible that Dow Industrial during 2012 will test its historical record of 14,164.53 (October 9th, 2007). It shouldn’t be forgotten that Dow Industrial usually performs well during Election Years. Based on historical statistics, Dow performs well in the Election years and bad in the years after.

What could ruin this nice picture?

But what could ruin this bullish picture? The real danger for the US economy and the Dow Jones comes from across the Atlantic. The European economy is very weak at the moment, with zero growth and high unemployment. In addition, the southern countries (Spain, Greece, Italy, and Portugal), along with Ireland, face heavy deficits and are still considered very risky for lenders. These systemic fears lead to high government borrowing costs, which in turn create even larger deficits. Putting all the pieces together, we can conclude that things may get worse, especially for European banks. This situation poses a major problem for the global economy and could jeopardize the future of the American markets in 2012. If things go badly in 2012, the Dow will probably test 12,000.

Read more: Dow Jones Trading Signal 2012

📱 Apple Stock (AAPL) Price Correction

Recently, Apple’s stock (AAPL) has experienced heavy selling. The share price has dropped from $644 a few weeks ago to around $598 today. The rally that began at the end of 2011 provided investors with almost a 100% return, as shown in the chart below (Yahoo Finance). This price correction is considered entirely reasonable, especially if it does not exceed 10% from the high of $644.

Apple’s fundamentals remain strong (P/E = 17.03 and Dividend Yield = 2.65%), and the company holds approximately $100 billion in cash. Apple’s current market capitalization stands at $558 billion.

Basic Numbers for Apple Stock

Below are some key figures and financial ratios for Apple’s stock:

Trading Center (2012)