Facebook (NASDAQ: FB) is enjoying very strong growth at present, and investors acted accordingly – sending the company’s stock price well over the $80 mark.
The company is by far the undisputed leader in the social media arena and growth prospects are looking bright. Facebook only moved to the upside from the moment of its IPO due largely to a solid online advertising platform.
While the road has been a bumpy one, in the sense that in the first three days from the IPO the company lost 24% of its original price and then the loss went all the way up to 50%, strong revenues each and every quarter ensured that the stock rebounded sharply.
We’re talking about a 200 billion dollars company here, and while some analysts are concerned that the growth rate for new users is not that strong anymore, this is offset by the addition of new features to the Facebook platform, and by other businesses, Facebook owns WhatsApp and Instagram, which are both growing above expectations. This keeps the pace for the overall group.
From a technical point of view, after the $85 mark has been reached, a correction has started and now share prices stay a bit below the $82 level. However, looking at the move to the downside, this three dollars move looks to be made in equal legs, and this implies that this was no impulsive move and the next move probably will not be one either.
In an impulsive move at least one wave needs to be extended, meaning it should stand out of the crowd. Here, we have none that are noticeably extended and this leads us to the only conclusion possible: this is a correction.
As a consequence, from both a fundamental and a technical point of view, I am favoring call options on the FB stock price, and being at the start of April, an end of month expiration date should do just fine.
The recent miss in the jobs numbers in the United States increases the pressure for the Federal Reserve to delay raising rates and this can only benefit stocks in the sense that there is an inversely correlated equation between interest rates and stock prices: a hike always brings lower equities, and a cut brings higher equities.
From this point of view and considering the overall growth perspectives discussed in this article, FB looks promising in the short/medium term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
