All eyes are on the Fed today, but unless they throw a massive curveball today’s statement should be a snoozer. Your attention would be better served focusing on Facebook Inc (NASDAQ:FB). The social media king scored a robust surge yesterday and appears primed for its next advance. Here are the technical take and trade for FB stock.
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We begin with the trend which is toeing the bullish line. FB boasts rising 200-day, 50-day, and 20-day moving averages showing buyers are dominating across all time frames.
Their run hasn’t been without the occasional respite, however. Profit-taking has crept in from time to time allowing the stock to consolidate and digest big gains.
The last two months are a perfect example. Since pole vaulting after it’s rousing late-July earnings report, Facebook has been treading water. And that’s perfectly okay in my book. Such meandering has allowed the 50-day moving average to catch-up to the once extended price. And now we have a perfect base for FB stock to launch from.
With yesterday’s rally, we’re once again approaching the recent highs and barring a monkey wrench thrown by Janet Yellen, it looks like Facebook is ready to rip.
Volume patterns are supporting a bullish bias. Ever since its July earnings release, we’ve seen little, if any, distribution crop up which suggests sellers lack any real conviction. Mix that in with the fact that we remain in a rousing bull market for tech stocks and this FB breakout setup has everything going for it.
A Likeable Facebook Trade
If FB takes out Tuesday’s high ($172.56), then buy the Nov $175/$180 bull call spread for $2.00. Your initial cost represents the max risk and will be forfeited if the stock sits below $175 at expiration.
The max reward is the spread width minus the initial cost, or $3 in this case. To capture it we need FB to rise above $180 by expiration.
By risking $2 to capture $3, this spread offers a potential 150% return.
As of this writing, Tyler Craig held bullish positions in FB. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
