Facebook Stock Tests Key Support After Rare Downgrade

Facebook is testing its footing above the long-term support of its 80-day moving average

Managing Editor
Jan 12, 2018 at 10:02 AM
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Facebook, Inc. (NASDAQ:FB) is falling in early trading, after CEO Mark Zuckerberg, announced that the social media platform will be filtering its News Feed to prioritize what's been shared by a user's family and friends, as opposed to non-advertising content produced by publishers and other businesses. Zuckerberg said he expects the shift to have a negative impact on user engagement and time spent on the site over the short term, though there's expected to be no impact on advertising.

In response, Stifel downgraded FB today to "hold" from "buy." Separately, SunTrust Robinson and Morgan Stanley raised their price targets to $240 and $215, respectively.

FB is down 4.5% at $179.32 at last check, with the stock testing critical support at its 80-day moving average, which has contained the equity's pullbacks since last June. This trendline is currently located at $176.90 -- about 6.4% below FB's Jan. 8 record high of $188.90.

Today's downgrade is unusual, as analysts are broadly optimistic toward the social media giant. Prior to the fresh cut at Stifel, all 27 brokerage firms following FB carried a "buy" or "strong buy" rating.

However, in the options pits, sentiment has not been so optimistic. The FAANG stock's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 10-day put/call volume ratio ranks in the 86th percentile of its annual range, suggesting that puts have been bought at a faster-than-usual clip relative to calls during the past two weeks.

And while some of this put-buying may have been related to hedging on the part of FB shareholders, it's worth noting that short interest on FB stock rose almost 19% during the past two reporting periods. This recent crop of bears will no doubt be watching the stock's progress around its 80-day moving average very closely in today's trading.

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