If you’re like me, you are probably on Facebook (FB) often checking updates on friends and family. FB is an incredibly fun stock to trade. It is quite volatile and in my opinion, has some serious moves left in it.
Here are 10 facts about the FB chart.
#1 On October 22, 2014 FB made an all-time high of $79.85.
#2 The $79 price range is where FB experienced some strong selling pressure just three weeks ago.
#3 FB bounced very nicely off the 100-day simple moving average on October 14, 2014 and October 15, 2014.
#4 The earnings announcement is on October 28, 2014 and no one ‘knows’ how the market is going to react.
#5 This is a great time to be selling covered calls on FB. Since it’s at an all-time high, an investor who has 100 shares right now could sell the $85 covered call on FB expiring October 31,
2014 and receive approximately $0.70 cents per share. If FB closes above $85 on October 31, 2014 that investor would sell guaranteed a profit, because $85 is at an all time high and around $6.00 a share higher than it is as I write this (on October 22, 2014).
#6 As of October 22, 2014 FB did not reach the top of the Bollinger Bands® (with a standard deviation of two off of a 20-day simple moving average). This shows a tad bit of weakness, giving me the impression FB could trade sideways a few more days or even until earnin
gs (meaning a covered call could be sold for the expiration for October 24, 2014).
#7 The bullish volume on the bounce was stronger than the current bearish volume.
#8 If FB closes above $80.11 that would be a close at an all-time high. Therefore, since the stock is making higher highs and higher lows, the sentiment would be more bullish than bearish.
#9 With a target at $88.46 and a stop at $77, the risk to reward on the above entry is pretty solid.
#10 If you’re in FB over earnings, buying insurance in the form of protective puts over earnings is a great risk mitigation technique, and this is because FB could gap strongly either way, up or down, and it’s always a good idea to protect your investments with insurance (just like home owners insurance).
Friends, earnings season is upon us! Enjoy, trade your plan and thanks for being outstanding!
