Facebook’s crazed leap last week died within a hair of the 171.25 target (see inset) disseminated to subscribers when the stock was $20 lower. Although we followed through on a plan to buy put options when FB kissed the target, the anticipated pullback was so labored and weak that we were happy just to scratch the trade and wait for the next juicy shorting opportunity. And it will surely come, since the company’s troubles are not going away simply because earnings are still robust.
The WSJ and other ray-rah news outlets tripped on themselves effusing over the record revenues announced last Thursday. But the Journal and its cheerleading cohort have a habit of focusing so intently on quarterly earnings that they often fail to see a bigger picture that in this instance portends increasingly difficult times ahead for Facebook. In case they hadn’t noticed, Facebook CEO Zuckerberg is at the top of the hit-list of a growing number of critics who see social media as a bad deal for everyone but its purveyors. As one of them astutely noted, if the service is free, you are the product.
Deft Evasions
Zuckerberg’s smarmy condescension toward critics, most memorably on Capitol Hill and in front of EU regulators, has become legendary, as have his deftly worded evasions. The pols are so used to getting stonewalled that his bamboozling brand of doublespeak comes across as refreshing and ingenuous in comparison. He got prime space in the WSJ last week to go on the offensive with more bullshit: “We need your information for operation and security, but you control whether we use it for advertising.” Yeah, sure. An apology it wasn’t. Zuckerberg only apologizes when security has been breached in a big way, or when Facebook has embarrassed itself in sundry other, appalling ways. Then it’s back to business as usual, as the company purports to do something about it. Facebook’s cynicism toward moral and ethical issues is well documented in this article by Natasha Lomas. Read it and you’ll begin to understand how an online service with billions of subscribers could become a pariah overnight. For our part, as this distributive rally unfolds, we’ll look to get short at every promising opportunity. For starters, that would imply using a ‘counterintuitive’ signal if the stock falls to x=159.49 of this pattern. _______ UPDATE (Feb 5, 7:05 p.m.): The gratuitous swoon that has played out over the last few days has raised the trigger point for the ‘CI’ short to 159.79. And so it shall remain unless, as appears likely, the short-squeeze rally takes out Tuesday’s 171.98 high. We’ll reconsider the trade if that occurs, but I’m not inclined to kiss it off just because it plays hard-to-get._______ UPDATE (Feb 6, 5:40 p.m.): Today’s head-fake raised the trigger point for the CI short to 160.31. If the stock moves decisively above the 172.47 intraday day, we’ll scrap the plan. _______ UPDATE (Feb 9): No change.