Today’s chart is of Facebook Inc.
(NASDAQ:FB), which operates as a social networking company worldwide. The company builds tools that enable users to connect, share, discover, and communicate with each other; it enables developers to build social applications on Facebook or to integrate their websites with Facebook; and it offers products that enable advertisers and marketers to engage with its users.
What I'm looking at:
Strongly outperforming broader market, up 101% year-over-year and 45% year-to-date.
Possible stall or reversal between current level and round number $40 level, which represents 50% YTD level.
Average Directional Index suggesting current uptrend is in a mature stage.
Call buying on FB has been very aggressive during the past 10 days, with three calls bought for every put, indicating an extreme in optimism.
Enormous call open interest resides at the 38-,39-,40-, and 41-strikes for the September/October series which could represent roadblocks for further price appreciation.
Based on average daily volume, it would take less than a half a day for shorts to cover, an indication that most of the shorts have left the building.
Analyst community favors FB, as 26 out of 30 rate the shares a “buy” or better
With optimism running high and a possible overhead resistance, avoid initiating new aggressive long positions. If interested in shorting use a stop above $40 and target $34 area.
This article by Tony Venosa, CMT, was originally published on Schaeffer's Investment Research.
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No positions in stocks mentioned.