Facebook, Least Trustworthy as per Quartz Survey

Facebook, Least Trustworthy as per Quartz Survey

Last week, amid pressure from Congress, online social media platform Facebook, Inc. (NASDAQ: FB) confirmed that several Russia-based groups have bought ads to influence the voters during the US Presidential campaign. For several months, opposition parties have been voicing their concern over the use of Facebook by foreign groups to mislead voters on divisive issues. Now, the acknowledgement and apology from Mark Zuckerberg has given a chance for the punters to hammer the stock. Additionally, there are few more negative developments which are expected to trigger a downtrend in the stock of Facebook, which closed at $172.50 on Monday.

The Menlo Park, California-based company revealed that nearly 3,000 ads, worth $100,000, were bought over a period of two years. A portion of those payments were in Rubles. Facebook argued that other than the misrepresentation of groups who bought the ads, none of the content related rules were broken. Furthermore, Facebook pointed out that it would have been fine for the company, if the advertisers had spent on ads in their actual name instead of masquerading as different groups in the US. Facebook also said the ads were focused on issues such as gun control, race, LGBT rights, and immigration. The social media giant also revealed that as many as 10 million people were exposed to the ads in the US. Furthermore, 44% of the ad impressions were seen before the election, while 56% were seen after the election.

Facebook approves most of the contents without human intervention. To avoid a repeat of the incident, the company said it will appoint 1,000 more people to review ads and prevent misleading people on divisive issues. Still, Facebook warned that it is practically impossible to review almost 8 million ads flagged every day.

While the incident highlights the massive size and power of Facebook, lawmakers are not pleased at all. They are concerned about Facebook’s ability to influence public opinion and lack of users’ privacy. A survey conducted by Quarts, an online tech publication, showed that nearly 80% of 1,600 surveyed readers do not trust Facebook with their personal data. While only about 21% of respondents trust Facebook, the study revealed that 46% trust Amazon with their private data. The negative publicity is expected to harm the stock’s valuation in the short-term.

The price chart indicates heavy resistance for the stock at 173.50. Furthermore, the De-Marker indicator confirms an overbought scenario. Thus, we expect a downward correction to set in.

Facebook - Technical Analysis - 10th October 2017

A low or below option is ideal to make money from the anticipated decline. So, we are planning to purchase such an option when the stock trades near $173 in the equity market. A time period of one week will be selected for the expiry of the contract.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.

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