EarningsBeats.com Digest for October 13, 2021
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This Chart Is So Ugly That I'm Expecting A Rally
You may not want to view this chart because of its graphic nature. It's ugly and there's hardly anything positive on it. And that's why I like it. Welcome to Options Expiration Week! Facebook (FB) has really turned bearish over the past 5-6 weeks. The daily PPO has reached -3, which barring the pandemic, had not happened since
Q4 2018 during the trade war. It's in the midst of a very nasty down channel and volume trends are horrid. The AD line is sinking, internet stocks ($DJUSNS) are weak, and FB is downtrending relative to internet stocks. Here's the current technical view:
There is nothing to like about this chart. But that's EXACTLY what's positive about it. It appears to have no hope, so EVERYONE is piling into put options. During our October Max Pain webinar on Tuesday afternoon, I highlighted the massive put interest in FB. FB currently has $173 million of net in-the-money put premium. That's a TON and it could provide market makers all the incentive they need to carry prices higher. First,
we have an inflation report (CPI) due out Wednesday morning that could impact plenty of growth stocks. After that, I'd expect to see a rally in FB shares, even if it's only temporary in nature. I calculate max pain to be 343.29 on FB, and while I don't expect to see that type of rally (though it's possible), any directional move to the upside in FB shares would benefit market makers.
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Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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