Uncertainty. Tenuous relative weakness. What’s there to be afraid of? When it comes to Facebook (NASDAQ:FB), that depends on whom you ask. But when it comes to owning FB stock more confidently, getting acquainted with a hedged, risk-adjusted strategy and ‘unliking’ meddling headlines or spooky price charts has this investor’s vote. Let me explain.
Shares of Facebook are among the Nasdaq Composite’s most influential leaders Thursday. FB is up nearly 2% compared to the index’s 0.55%. The gains are matched only by Tesla (NASDAQ:TSLA) and enjoy a comfortable lead over other mega-capitalization tech peers with the exception of Alphabet (NASDAQ:GOOGL,NASDAQ:GOOG).
But today’s vote of confidence by FB investors has also been a long time coming amid bearish intrusions occurring off and on the price chart.
Worries of 2016-style election interference vis-à-vis Facebook’s social media platform, despite its best efforts to counter bad actors of all kinds, have persisted. But the latest word the company is banning content which encourages intimidation tactics or “militarized” language which could deter a fair vote has some shareholders breathing more easily Thursday.
As said, Facebook has been facing other potential threats too.
Social Media Competition
Along with Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Alphabet, Facebook has been in the crosshairs of regulators regarding unfair and monopolistic business practices. The House Judiciary’s Big Tech antitrust report was released late Tuesday and there’s the possibility of a Federal Trade Commission antitrust lawsuit waiting in the wings.
As TheStreet.com’s Jim Cramer points out though, Facebook may be big, but really?
Thriving competition such as TikTok, Twitter (NYSE:TWTR), Snap (NYSE:SNAP) and Pinterest (NYSE:PINS) suggest something other than Facebook being a social media monopoly. What’s more and as Jim Cramer points out, there’s also the millions of small- and medium-sized businesses Facebook has helped put on the map and thrive. Could it all be a pointless or misguided political game?
That’s not all. Bearish interference has also been visible on FB’s price chart to help spook investors. But those fears may also be worth less than they’re made out to be in today’s stock market.
Facebook Stock Weekly Price Chart
Source: Charts by TradingView
It wasn’t long ago Facebook stock’s technical picture had me worried. I’m much less concerned today though. Far from ‘fake news,’ a cautioned bearish monthly chart reversal pattern which broke beneath uptrend still exists. But a broad-based bullish follow-through day and healthier investing environment, which I’ve written about extensively the past couple weeks, has continued to improve. Bottom-line, it would be foolhardy to turn a blind eye.
Currently, some of that improvement has manifested itself on the weekly time frame in FB shares. Last week the stock managed to confirm a bottoming candle after four weeks of lower-lows and lower-highs. This view also reflects an oversold stochastics indicator which just recently formed a bullish crossover pattern. It could be a starting point for a meaningful intermediate low. And again, with the broader market acting as support, those odds are improved.
Personally, I don’t have much use for Facebook. But I can appreciate why it’s important to others and how Facebook is the type of stock suitable to be a core portfolio holding. I’m also smart enough to know when its time to ‘stand down’ as a bearish agitator.
For investors that want to make something more of today’s bullish victory in shares, I’d always recommend hedging that exposure with a highly adaptable, limited and reduced risk Facebook stock collar.
On the date of publication, Chris Tyler holds, directly or indirectly, positions in Pinterest (PINS) and its derivatives but no other securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.