Last week’s squeeze is this week’s pop (FB) (September 24, 2012)
FB
Good evening. Dan Fitzpatrick here at StockMarketMenror.com and now OptionMarketMentor.com, hope you’ll check that out during our initial on trial period which we’re going to be changing in a few weeks. I want to look at Facebook ( $FB Facebook Inc ). Last week I was talking about this as a volatility squeeze, the bands were kind of poking a little bit together, stock moved up, you can’t really see too well here, but the stock moved up on pretty good volume and that indicates to me that, hey, maybe all this is going to lead to more upside, perhaps a short covering rally and all that, and that’s what I saw on the chart, that’s still what I see in the chart. Anybody who’s listened to videos of mine, other than this one, knows that I’m not a Facebook ( $FB Facebook Inc ) fan, I don’t even have my account anymore, I got tired of it. This whole thing about mobile, so what? You’re going to put ads on your iPhone that pop up when you’re dealing with your Facebook ( $FB Facebook Inc ) and you’re going to click on that rather than just say, “You know what I just got this little tiny screen.” Anyway it’s kind of, in my view, kind of a silly thing, I’m probably wrong which is why I’m not a billionaire. But here’s the thing, the stock fell over nine percent today and I believe, you know you never know what really happened, what really happened is sellers got pretty aggressive today. I noticed that, you know there’s this article in Barron’s that says, look stocks still cheap, it kind of lists the same ones that I’ve been talking about so there’s nothing new here; but the stock is not cheap it’s still expensive, I think the guy said $12.00 or $15.00 something like that and the stock takes a dive. So in my view this volatility squeeze, that’s over, done. You know why? Now, we could get a bounce here, but I don’t make predictions I just trade. Here is why I say it’s done. The whole idea of a volatility squeeze is the stock moves up because buyers need to buy some stock, period. They’ve got to pay up for it;, at some point that initial buying wears off and then the stock starts to drift lower and then, at some point, buyers come in again and the stock takes off. That’s the three phases of volatility squeezes. Phase one is the break out, phase two is the pull back, and then phase three is the continuation. You could say, “Well maybe that’s what we’re having now Dan, you know we had our phase one here, now we’ve got our phase two on the pullback, now we’re going to get a phase three up this way.” Okay, that could happen but this sell-off occurred on pretty big volume, for a pretty big reason, and that is two fold, number one a bearish Barron’s article, number two, nobody felt like buying the dip. The stock doesn’t go down nine percent if traders want to buy the dip. This is my suggestion, if you’re long the stock good for you, I hope you bought it at the low but as long as the stock stays above $20.36, which is today’s intraday low, then I guess you’re good. But just keep in mind that there are a lot of shares that are going to be freely trading in the next couple months, I forget the exact days, I’m sure about 98 percent of you guys know them, I just don’t keep track of that stuff on this because I don’t really trade Facebook ( $FB Facebook Inc ). Just know that there are going to be a lot of shares that are going to be released for sale, and I don’t think more than two or three of those folks are going to look at the stock and say, it’s down at $20.00, I think all wait till the shares get up to about $30.00 or $35.00 before I sell my shares. No, these guys aren’t stock traders they just own stock, and so they will be selling, that will ultimately push this stock lower. So again I think volatility expansion, pretty much done, we could see some support here and in fact some may say, “Well, I believe this is a good buying opportunity because look what happened the last time.” You could very well be right. I’m staying away because I don’t like this big sell-off on this big volume. So if the stock falls any lower than this, if I were you, I would suggest getting back in the agnostic camp and go friend somebody else. Okay members, over to the Strategy Session; got a lot of stuff there for you. Free Chart