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Trader: Facebook Shares Are 'Technically Damaged'

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Trader: Facebook Shares Are 'Technically Damaged'
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Investors looking to buy Facebook, Inc. (NASDAQ: FB) after the stock's more than 15-percent fall in the past three months may want to hold off and wait for a better entry point, according to Todd Gordon, founder of TradingAnalysis.com.

What Happened

Facebook's stock is on track to record its second-worst quarterly performance ever, and near-term relief is unlikely, as the stock is "technically damaged," Gordon told CNBC during a Thursday "Trading Nation" segment.

Facebook's stock was hard-hit after a concerning second-quarter earnings report in late July, and it failed to "get back on its horse and head higher," he said. 

Why It's Important

Facebook shares are now trading below their late-July lows, which means the stop could drop lower and retest the $150 level, which marks the low levels associated with April's privacy scandal, Gordon said. Investors may want to consider either taking a short position to protect any long exposure to Facebook or to gain pure exposure to downside momentum, he said. 

What's Next

Gordon said he likes the October monthly options, and investors may want to consider buying the Oct. 19 155-strike put and simultaneously selling the Oct. 19 150-strike put for around $130 per options spread.

"You don't have to hold the thing all the way to max profit," he said. "You can trade it just like a stock. You're buying a stock at $130, and if you get up to $180, $190, $200 on the spread and you like the support coming in, you like the sell-off to ease up, go ahead and take the trade-off." 

Related Links:

Tech Stocks Fall Amid Twitter, Facebook Senate Testimonies

Pivotal's Brian Wieser Sees More Trouble Ahead For Facebook

Posted-In: CNBC social media Todd Gordon TradingAnalysisMedia Best of Benzinga

 

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