Editors Note:

I was going to recommend this play on Monday but an oversized gain kept me from adding it. Today's decline is a second chance. Facebook shot up more than $3 on Monday and kept me from adding the position. Today's -1.70 drop put it back into the realm of possibilities thanks to its upward momentum and relative strength.


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FB - Facebook - Company Description

I do not really need to tell you what Facebook does. They are turning into the biggest online marketing portal on the planet and they still have not fully monetized WhatsApp, Instagram and several other web portals they own.

Facebook beat estimates for Q4 earnings at 79 cents compared to estimates for 69 cents. Revenue of $5.84 billion beat estimates for $5.37 billion. Earnings rose +46% and revenue +52%. Full year revenue rose +44% to $17.93 billion.

Monthly active users rose to 1.59 billion. Monthly active mobile users rose to 1.44 billion. Every day users watch more than 100 million hours of video. Zuckerberg hinted they were going to create s video space similar to YouTube to expand that video viewing. Average revenue per users rose to $3.73 compared to estimates for $3.43. WhatsApp ended the year with nearly 1 billion monthly active users.

Mobile ad impressions rose 29%. More than 2.5 million advertisers are actively promoting products on Facebook.

Post earnings Facebook shares rallied to $117 before the February market crash knocked them back down to $97. In another newsletter I was trying to launch a play at the 200-day moving average at $94.50 and never got filled. The rebound over the last week to $108 on Monday was solid. With the close at $105 today this may be our best chance for a new entry.

Earnings are April 20th. I am using the April options because they are cheaper than the May by a lot. They expire on the 15th so we will be out before they report.

Because of the market decline today I am going to use an entry trigger. If the market continues lower, I would rather not be holding calls at this level if we can potentially buy them lower.

With a FB trade at $106.45

Buy April $110 call, currently $3.10, stop loss $98.65


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