Facebook Inc (FB) Approaches Technical Hurdles Ahead of Earnings

Social media stock FB will report earnings tonight

Feb 1, 2017 at 11:20 AM
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Facebook Inc (NASDAQ:FB) will hit the earnings stage tonight. Expectations among options traders are sky-high heading into the event, based on data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, the social media stock has racked up a call/put volume ratio of 1.92 in the last two weeks -- in the bullishly skewed 77th annual percentile.

That's not to say FB has a clear path higher. In fact, the current week has been historically bearish for the stock, with just one positive return in the past four years. Another sharp loss could be triggered by a poorly received earnings report. In the session after the company's early November trip to the confessional, the shares dropped 5.6%.

While the stock is up 0.5% at $130.92, it's staring up at the $133-$134 area, which has historically served as a roadblock. FB's record high, notched in late October, was $133.50 -- and was followed by a sharp pullback. Not to mention, just north of this zone is the $135 level, home to huge call open interest in the February, March, and April series. In fact, during the last 10 trading days, the April 135 strike has seen the largest open interest increase among call options, adding over 17,800 positions. These bullish bets could reinforce the overhead speed bump.

Another factor potentially working against the equity is its 14-day Relative Strength Index (RSI). Clocking in at 65, FB's RSI is approaching "overbought" territory, suggesting a near-term dip could be in the cards.

Having said all that, the fact remains that the stock has been extremely impressive of late. In the past month, FB has outperformed the broader S&P 500 Index (SPX) by 10.5 percentage points. And since hitting a post-election low of $113.55 in mid-November, the shares have surged over 15%.

Finally, on the fundamental front, Facebook Inc (NASDAQ:FB) is working on a set-top box, according to The Wall Street Journal. The reported goal is to turn the social media site's video content into a viewing destination, potentially translating into additional advertising revenue.

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