Sentiment Shift Could Add to Facebook Stock Woes

Facebook could be looking at analyst downgrades in the near future

Research Dept.
Nov 13, 2018 at 12:28 PM
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The chart of Facebook Inc. (NYSE:FB) stock has taken a turn for the worse. The shares of the social media giant have broken out of their long-term uptrend, and have been stuck in a downtrend since a massive July bear gap. What's more, a brief rebound attempt struggled to break through the $155-$160 area, site of FB's previous 2018 lows. Given this concerning technical outlook, the stock looks poised to keep moving lower, especially considering the bullish bias on Wall Street.

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Looking at the options breakdown on Facebook, peak put open interest resides at the January 2019 150-strike put. However, there's very little call open interest below this level, suggesting options traders are expecting FB shares to rise going forward. A shift in sentiment among options traders could work against Facebook.

Analysts also still love the social media giant. In fact, 26 of 31 covering brokerage firms have "buy" or "strong buy" ratings in place, and the average 12-month price target stands all the way up near $196, a roughly 37% premium to current levels. Watch for downgrades and/or price-target cuts to come through and keep the pressure on FB.

Also, Facebook has been a strong target for premium buyers over the past year, based on its Schaeffer's Volatility Scorecard (SVS) of 81, showing a tendency for the stock to make bigger-than-expected moves over the past year relative to options traders' expectations.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this FB commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.


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