Yesterday I explained why the market was set up for a big move, and told you I’d have a FANG stock for you today.
Facebook (FB) has had a rough 6 months, but its quick recovery from its December low along with technical divergences at the low suggest that its ready to rally.
The 4 days of consolidation after breaking out over its 50-day moving average provide a clean trade set up.
The first trade would have been to buy the breakout yesterday or the day prior, but now the best reward to risk trade requires us to wait for a pullback.
There is good support in the $146-$147 area so buying a dip to $147 is what I’ll look to do.
If its breakout is a good one, then it shouldn’t go much lower than $145, so I’d give it a little extra room and put my stop under $144.
FB reports earnings on January 30. I’m not suggesting that this trade should be held through the earnings announcement since earnings can create unexpected moves.
However, the announcement does provide a potential reason for the stock to rally, as beaten down stocks will often rally into the announcement.
Additionally, if you like to trade options, then options that expire after the announcement tend to hold their value well up to that date.
Rick Nartarian, Chief Investment Officer
The American Investor Daily