Facebook Stock Tests Key Technical Level After Data Drama

Bullish options premiums have plummeted today

Mar 19, 2018 at 10:14 AM
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Shares of Facebook, Inc. (NASDAQ:FB) have plunged 5.6% this morning to trade at $175.84, amid reports that U.K.-based Cambridge Analytica -- a political data mining firm with ties to Steve Bannon, a former adviser to President Donald Trump -- gathered personal information from more than 50 million profiles on the social media site without getting consent from the user. The data was reportedly used to create psychological profiles that may have helped influence voter behavior in the 2016 U.S. presidential election.

While FB stock is selling off fast, analysts don't seem to be shaken by the news. In fact, no downgrades have been issued for Facebook shares, with 27 of 29 brokerages still maintaining a "buy" or better rating, and the average 12-month price target docked at $222.81 -- a 26% premium to the equity's current perch.

Options traders, meanwhile, have been anticipating more upside for Facebook -- at least through the end of this week. The weekly 3/23 187.50-strike call has seen one of the biggest increases in open interest over the past two weeks, with more than 9,900 contracts added. Data from Trade-Alert hints at some buy-to-open activity here, suggesting speculators expect FB to be perched north of $187.50 when the weekly options expire at this Friday's close.

And amid today's pullback, the stock's call options are pricing in unusually low volatility expectations compared to their put counterparts. At last check, FB's 30-day implied volatility skew of 14.7% was ranked in the elevated 95th annual percentile.

Looking closer at the charts, Facebook shares rallied more than 53% in 2017 -- and carried this momentum into the new year, topping out at a record high of $195.32 on Feb. 1. After hitting this milestone, the stock pulled back to its 200-day moving average and bounced, and is now testing support in the $176.15 region, home to a 23.6% Fibonacci retracement of the surge from its 2016 close to its all-time peak.

 

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