After logging some big-time November gains, the market is finally starting to show signs of weakness. The major indexes – the S&P, Dow, and Nasdaq Composite – are all crumbling near their record highs.
If this keeps up, investors will start wishing for a white Christmas. Because over the next few weeks, all they might be seeing is red.
…Even from market bellwethers that posted impressive yearly results.
America’s top tech firms are likely to get crunched as well (if equities continue dropping). Don’t forget, these are the stocks that have kept the market rising for most of 2019. If things go south, bulls will flee in droves.
Analysts (myself included) have argued that the tech sector is currently overbought, anyway.
Should the market endure a correction, tech blue chips could shed market cap in a hurry.
And one company in particular – Facebook Inc. (NASDAQ: FB) – appears ready to do just that.
My apologies to Mr. Zuckerberg. He’s been the subject of scrutiny almost all year, stuck squarely under the magnifying glass of both regulators and legislators alike.
But what could be even worse for Zuck & Co. is a FB stock slump – something that’s rapidly approaching.
Since July, FB shares haven’t really done much but bounce around. Since October, conditions have improved, but if today’s price action is any indication, FB is about to flop yet again.
A lower high was set yesterday relative to the high from mid-July, and a lower low was set in early October. FB never really bottomed out since, meaning that its last low was a bearish low – a bad sign for FB bulls.
Add that to the fact that contact with the upper Bollinger Band (BB) was made, and you’ve got a recipe for disaster. The most recent daily candlestick closed below the last two candle bodies, and from where FB stands now, it might make sense to go short below the day’s low with a trade trigger of $197.00. The stochastics, which remain high, suggest that FB is overbought.
If FB moves past the trigger point and drops, there could be a significant fall waiting on the other side, potentially to around $170 (or below the October low).
An appropriately priced and dated put option would easily return triple digit gains if FB corrected that much.
Whether or not that happens remains to be seen, but at present, we’ve got a setup to go short on one of the market’s most popular stocks. I guarantee you bears are watching this one with great interest, and once FB drops a little bit more, they’ll be ready to pounce.
All while the general market sinks along with it.
