FUNDAMENTALLY COMPELLING Quality company (5yr revenue growth +55%, long-term EPS +35%) Trading at a premium valuation (63x PE, 8.5x P/BV) Positively biased consensus with +19% upside target Happy to own the stock for the long term, but at what price?
TECHNICALLY STRONG Superb up-channel post July 2013 breakout Up-trend accentuation post Aug'15 flash crash Technical picture positive on most time frames (M, W, D) Has been registering higher highs and lows Stock looking overbought on the longer time frames
WATCH THE FOLLOWING LEVELS PRE/POST EARNINGS Watch long entry points at 128/123.50/117
OR: NEAR 0-COST OPTIONS STRATEGY BUY 1xNov4'16 $135 call = $-2.07/share SELL 2xNov4'16 $122 put = 0.99/share TOTAL Pay 0.09/share to benefit from the upside WORST case scenario: Go long -7% below current price
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Great numbers but cautious guidance on future growth momentum took a toll on the stock post-market, it seems. We should be exercised on the puts. Great news if the stock holds its up-channel above 118 (channel bottom and MA200 support). Bad news if it breaks it sustainably. I will update this trade/idea during market hours.
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FB still comfortably within the long term up-channel, and some 2.75% away from its bottom. The consolidation has taken the stock very near our $122 put strike.
At the current level, we might not be put on the options (too close to the money), in which case, we would be losing a meager 0.09/share.
If exercised nonetheless, I would keep the shares, targeting both a short-term rebound and a longer term move towards the upper part of the channel.
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Call expired worthless. Puts assumed to be exercised. This trade is now closed with a total cost of 0.09/share (0.07% of stock price at trade inception). Picking up this idea in a new thread ("Playing up-channel rebound") which assumes a long position in FB at 122/share.