FANG gets its bite back – but there’s one name that could sit out the rally
FANG stocks are getting their bite back, but there's one name that sat out the rally on Thursday – Facebook FB .
While shares of Amazon AMZN , Netflix NFLX and Alphabet GOOGL were sharply in the green Thursday afternoon, Facebook shares were struggling to stay afloat. TradingAnalysis.com founder Todd Gordon says the technical setup for the social giant is weak.
Gordon pointed out that while Facebook has rallied about 1.5 percent in the last week, the stock is still lagging the market, as during that time the Nasdaq has rallied 6 percent.
"I believe this recovery rally in the market is sellable, and with an underperformer like Facebook, it's time to go to work," he said Thursday on CNBC's "Trading Nation."
Not only that, but Gordon also sees a "two-step pattern" that he thinks is a bearish sign for Facebook. "This is a very common corrective structure that happens when you have a move that is trading counter to the trend, which I believe is now down," he explained.
To play for a move lower in Facebook, Gordon wants to buy the March 175-strike put and sell the March 170-strike put total of $1.45, or $145 per options spread. This is a bearish bet that Facebook could fall as low as $170 — or 5 percent — by March 16, which could precede an even bigger move down to the $150s in the trader's eyes.
Should Facebook close below $170 on expiration, then Gordon could see a maximum reward of $355, while he would lose the $145 premium he paid if Facebook closed above $175. To prevent the loss, Gordon wants to establish a point at which to stop out of the trade.
Based on a Fibonacci retracement, Gordon believes that $189.50 is the ideal level to get out of his trade, with Facebook trading at around $178 on Thursday.
Facebook has fallen more than 7 percent from all-time highs the stock hit on Feb. 1. It is currently up just 1 percent year to date.
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