Russian bears recently and clumsily sunk their collective “fangs” into Facebook Inc (NASDAQ:FB). But for FB stock today, it’s now hammer time. And for investors that like the company’s prospects off and on the price chart, a bull call spread in lieu of buying shares looks attractive. Let me explain.
It’s no state secret, Facebook has been in the news of late with stories of Russian “fake news” political content and allegations of who knew what and when. The latest spied by our eyes reveals more color on those nefarious fabricated stories and Facebook group pages.
What’s going to happen next? Some investors interested in FB stock may invariably look for clarity next month as FB, Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Twitter Inc (NYSE:TWTR) are set to appear before the Senate Intelligence Committee.
But for this investor, following a stinging sickle-like dagger on the price chart a couple weeks ago; it’s hammer time for bulls despite those pesky Russian bears still in the front page news.
FB Stock Weekly Chart
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Technically speaking and in an ode to the perseverance of capitalism, it’s now hammer time on the Facebook stock chart. That’s very good news — not fake news — for bulls willing to climb a wall of worry.
Admittedly, two weeks ago, the landscape in FB stock looked a bit less certain. Shares had been consolidating constructively within a flat base for a couple months when bears sliced some 4.50% off Facebook and in the process, damaged its technical prospects.
But then a funny thing happened, shares of Facebook failed to move lower. Not only that, FB almost immediately recaptured all of its losses and moved back inside the lateral base to form a bullish hammer reversal pattern on the weekly chart.
The Facebook stock price has moved marginally higher after confirming what we can now label as a shakeout pattern. As much and if you respect the power of mischievous price patterns and appreciate those nefarious Russian bears will soon be yesterday’s (fake) news and swept under the carpet — it’s time to get long FB stock now.
FB Bull Call Spread
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I still like the spread idea at it’s current price of $1.90, but if traders are really bullish, it’s not a good strategy.
Ultimately, above $195 and the full debit is lost at expiration. And given Facebook has earnings in early November, while it’s an acceptable risk from our vantage point, traders need to decide on this important trade-off for themselves.
Having said that and if traders are a bit more enthusiastic about FB stock’s prospects, the November $180 / $190 bull call spread for $2.00 may be more appealing. This vertical requires a larger move to breakeven at expiration as shares of Facebook will need to rally about 4% above a pattern breakout point of $175.49. That of course poses a different sort of risk. Below $180 and the entire debit will be forfeited at expiration.
The good news is, with a vertical spread a bullish trader doesn’t need to be concerned of FB overshooting the spread and price action which results in a loss. Furthermore and given the bullish price pattern and Facebook’s earnings reaction history; this does look like a caper bulls are entirely capable of pulling off at the expense of those Russian bears.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. . For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits and feel free to click here to learn more about how to design better positions using options!
