Here’s the long and the short of Facebook ($FB) (October 06, 2020)FB
A real quick video here; I like Facebook ( NASDAQ: FB ) as a short. A nice move up here, it fell below the 50-day moving average as it did here and as it did here. Both of these times the stock recovered and kept going higher. Here, it fell down here, ultimately it climbed back above the 50-day moving average along with the rest of the market, slightly below it but look, who’s counting.
It closed at the 50, one day above the 50-day moving average, and then it fell back down. So the stock is down for 1, 2, 3 days in a row back below the 50. And so I like this as a short, not in a big way, I am not shorting the company I am shorting this pattern, and there is a difference. The way that I do this, this is the way I look at it, I see a sell-off and then an attempted recovery up above there and then a failure, boom.
So this sucked in all the buyers, people who were looking at Facebook ( NASDAQ: FB ) and saying, this is my opportunity to buy, so they bought the stock here. Now, as the stock is rolling over they are in the red, they are not happy. They thought they were getting a great deal but they got on the wrong side out of the move and now Facebook ( NASDAQ: FB ) is coming back down so they are going to go ahead and sell their stock. They are going to go ahead and sell that and get out of the trade before they lose more.
That’s the thesis for why this stock is probably going lower. However, you need to keep a protective stop right above this level here, right above this last high, wherever it is. Right here you need to keep a protective stop above there and this is why; because if the stock takes off, and it could, it very well could, if it takes off you don’t want to get caught in a short squeeze. You are chocking off your trade right here, you’re cutting it for a small loss.
Whether or not you would buy it on the other side, I can’t tell you about that, that’s 9 steps ahead; nobody knows that, though they will tell you that they do. You are looking at the stock to continue down. If it falls to 250.00, maybe a little bit lower, fine, I’m not looking for a lot out of these short things. There is a buy-side of the market, there has been for 150 years, there is always a buy-side, a bias to the market.
When we take these shorts we take them for a very short period of time and then we cover. But I do think this short will work, I am just saying, make sure you keep a fairly tight buy stop on there so that the trade doesn’t get away from you if the stock reverses.