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7 Takeaways From Facebook Inc's Chart


The analyst community favors Facebook: 26 out of 30 rate the shares a "buy" or better.

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
Strategy: 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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Twitter: @schaeffers
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