Facebook has closed very strong yesterday
News of the company spending $19 billion to acquire WhatsApp has hammered shares of the company to just below $66. However as trading progressed and as the market digested the news the company has rebounded strongly by more than 5% from the lows. We aim to buy daily calls on dips towards $69.
Despite the fact that the company has been very strong in recent days we have observed a substantial pullback in the beginning of yesterday's session. News have broken out that Facebook has acquired mobile messaging service WhatsApp which drove investors into confusion.
After the initial drop the shares have impressively staged a booming rally higher closing at $69.48 in after-hours trading. As the new strategic endeavor was dissected by investors and they learned that Google was willing to pay even more, shares could go yet higher today.
However we will be cautious and wait for prices to drop to the 67.70-80 area in order to buy daily calls. The first level of minor support lies at Wednesday's top around $69. However given the volatility that we observed yesterday we will refrain from considering it.
The downside is protected by a rising trend line that will provide additional support below $67. Since that is the braking point of the trend if broken we will likely reverse our call and start buying puts, however we find that to be an unlikely case for now.
If you are a big risk taker you could try to buy hourly calls around $69, but we are not recommending it. Facebook has been trending very solidly to the upside in recent weeks and some seriously negative event must occur to cause a bigger pullback.