Why the Facebook rally could end at the IPO price

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Facebook shares have enjoyed an unbelievable run over the past week, as earnings that showed massive mobile growth, as well as excitement about mobile games, have brought the stock all the way back to the $38 price at which the company initially offered shares.

But that $38 level might also mark the end of the stock's recent bull run.

(Read more: Facebook nearing its IPO price. Here's why)

"Facebook, at current levels, is a stock that has recovered to a very difficult level where considerable overhead supply comes into play," Oppenheimer Chief Market Technician Carter Worth wrote to CNBC.com. "580 million shares of Facebook traded between $45 and $38 on the day of its IPO, so there are, by definition, a lot of 'dead bodies' above," or in other words, "hundreds of millions of 'pissed off' shares between $38 and $45 that are likely come onto the market as the stock probes into the high $30's and low $40's."

After all, Worth added: "The desire to 'break even' or to 'get my money back' is a very powerful phenomenon." For that reason, Worth advises selling Facebook shares.

(Read more: Facebook a 'small buy': Mark Mahaney)

Dan Nathan of RiskReversal.com is of the same mind. "I think the $38 level will be important from a psychological standpoint for retail investors," he said.

"Retail at first didn't expect to get a lot on the IPO, and then they got filled on way more shares than they really wanted. So if they haven't sold already, and stuck with it for more than a year, you will very likely be happy to take the recent gains and move on," said Nathan, a CNBC contributor.

The stock certainly appeared to contend with the $38 level in Tuesday trading. After rallying all day, shares hit $37.96 shortly before the close, only to retreat. That said, the stock has surpassed that level in Wednesday pre-market trading.

But even some who think Facebook shares are worth more than $38 don't think they're worth too much more. In what has to be one of the Street's odder price targets, Stifel Nicolaus analyst Jordan Rohan recently reiterated his "Buy" rating on the stock and slapped on a target of $38.01.

How is Rohan able to calculate the value of Facebook shares to the penny? "The target was intended to remind investors that I expected FB shares to trade above the $38 IPO price," Rohan wrote to CNBC.com.

Of course, if that's how high above $38 a bull sees the stock going, perhaps investors would do well to sell at that IPO price after all.

—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.

Follow the show on Twitter: @CNBCOptions.

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