Facebook Inc (NASDAQ:FB) stock slid on Wednesday, the last trading day in the month, as tech stocks looked to be the only S&P 500 sector to end the month in the green. Even that gain was at risk by late afternoon, however, and a glance at the major stock indices revealed a sea of red as the S&P 500, tech-heavy Nasdaq Composite, and Dow Jones Industrial Average all shifted lower.
It looks like Facebook stock is going to end the month in the red around $180 or slightly below after starting February off above $190 per share. Earlier in the day on Wednesday, it appeared that a key support level for the shares would hold, but by late afternoon, FB had broken below it.
InvestorPlace contributor Joseph Hargett pegged key support for Facebook stock at $181 to $182, noting that $181.25 marked a 50% retracement from this month’s low and last month’s high. He also pointed out that the 50-day moving average for FB is right in this same range, adding that it should provide solid support for the stock, “barring another blip in the market.” As the day wore on, however, that blip seemed to develop as Facebook stock plunged down into the $179s, which could leave some questioning where the next support level will be.
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Sentiment for FB remains as bullish as ever, however, as analysts have repeatedly tried to tell investors that they’re being irrational. According to Hargett, the put-to-call ratio was at 0.29 as the options market recorded more than three times as many calls as there were puts. He also said that the options market is pricing in a possible move of approximately 6% before the April expirations. He explained that this places the top bound for Facebook stock at around $193 and the bottom at about $171.
He suggested the April $190/ $195 bullish call spread for investors expecting FB to take off by then. However, this was also based on the technical support level set just below where the stock was trading. Still, he expects the company to deal with many of the concerns investors have right now, which should boost its stock. In order to break even on this options trade, Facebook stock would have to be at $191.40 per share at the expiration.
On the other side of the options market, he suggested the April $175 put contract, but unfortunately, Facebook stock is shifting dangerously close to that level as of the time of this writing. He warned that if FB tumbles under the $175 level before the contract expires, you may end up with 100 shares of the stock per contract for $175 per share.
Once Facebook stock dipped under the $181 key support level Hargett identified, it really started to drop off ahead of the bell on Wednesday. As of this writing, FB is down 1.65% at $178.46 per share.