Here’s your trade on Facebook (FB). (January 14, 2019)
FB
Let’s turn patterns to profits here with Facebook ( NASDAQ: FB ). This is my kind of semi-stream of consciousness thought here. They report earnings on January 30th so we are a couple weeks away.
Since the fall here the stock has had another earnings report and obviously, that didn’t do too well for the stock because it still just kept going down. The 50-day moving average is the red line here. I’ll take the horizontal lines off. We have a bullish option position, long the March calls short the February calls. Long I think the 140.00s, short the 155.00s, that’s for another story; the trade is doing good.
Anyway, here’s the thing: As I am looking at this chart I am seeing that the stock continues to make lower highs and lower lows. In fact, even if you look at where the stock is now if it reverses tomorrow then it is still below this last high in December so the pattern of lower highs and lower lows persists.
What is interesting is that it is now holding above the 50-day moving average. Whereas before I think it might have tagged it one day that was it, and then it fell. Relative to the 50-day moving average this stock is now actually now higher than it has been and the 50-day moving average is also flatlined. The reason it’s flatlined is because the stock has been trading at this level average over the last 50-days, it’s just math.
Here’s your trade: I don’t like Facebook ( NASDAQ: FB ). Check me out on Facebook ( NASDAQ: FB ), we have a business page and you never see me there, it’s not my deal. But there are billions that disagree with me I get that. The way I am looking at this stock now I see a potential opportunity. A lot of negativity already baked in, the stock is trading above this range. I think you can take this for a swing trade.
I don’t know what is going to happen in a week or two but it is obvious to me that the stock is not under distribution anymore. I don’t know how much accumulation it’s under but the fact that the stock is trading above this 50-day moving average after a really OBVIOUS downtrend. It is very obvious, this is not magical chart reading; this is easy stuff.
It is obvious that it was in a downtrend; this box is above that. It is not in my ideal buy configuration but as a swing trade I would say if the stock pops up above 147.00 tomorrow, the high was 146.57, if it trades up above 147.00 tomorrow I think you can be safe in owning this stock as long as at the very lowest you had your stop just a little bit below 140.00. So you are protecting yourself against the fakeout, against the stock falling like that.
Again, I don’t think that’s going to happen, I am just not getting that sense that this is really a fakeout, I think it’s an “undramatic” breakout. So look for $10.00 on this trade, that’s what I would look at. So you are risking 6.00 to make at least 10.00, we’ll put it that way, all right?
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