Editors Note:

Wednesday's sector rotation out of tech stocks is likely to be a one-day event on some stocks. There may be more selling in certain stocks but those that came to rest right on support should be bought.



NEW DIRECTIONAL CALL PLAYS

FB - Facebook - Company Profile

Facebook, Inc. provides various products to connect and share through mobile devices, personal computers, and other surfaces worldwide. Its solutions include Facebook Website and mobile application that enables people to connect, share, discover, and communicate each other on mobile devices and personal computers; Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application to communicate with people and businesses across platforms and devices; and WhatsApp Messenger, a mobile messaging application. The company also offers Oculus virtual reality technology and content platform, which allow people to enter an immersive and interactive environment to play games, consume content, and connect with others. As of December 31, 2016, it had approximately 1.23 billion daily active users. Facebook, Inc. was founded in 2004 and is headquartered in Menlo Park, California. Company description from FinViz.com.

Everyone should know this story. There is no need to go into lengthy detail on this tech giant. They posted blow out earnings and spiked from $170 to $183. Shares have traded sideways to down for the last two weeks but they have quit declining with three consecutive days at $178.

Analysts are targeting well over $200 because Facebook is printing money. Their growth is outstanding and they still have numerous web properties they have not yet monetized. They are launching Facebook TV, original content, the list of new opportunities is endless.

RBC Capital raised their price target from $190 to $230 to match Mizuho. Monnes Crespi Hardt is $210, Aegis Capital $215, Needham $215, etc. There is plenty of upside from here. Facebook is the largest earnings grower in the space.

Facebook fell $8 intraday and came to rest right on uptrend support and the support of the 60-day moving average.

Facebook has been showing good relative strength in the past several weeks and analysts continue to raise the price targets. This is a buying opportunity ahead of window dressing in late December. What fund manager does not want to have FB in his year end portfolio?

Buy Feb $180 call, currently $7.15, initial stop loss $169.25.
Sell short Feb $195 call, currently $2.35, initial stop loss $169.25.
Net debit $4.80.


PYPL - PayPal - Company Profile

PayPal Holdings, Inc. operates as a technology platform company that enables digital and mobile payments on behalf of consumers and merchants worldwide. It enables businesses of various sizes to accept payments from merchant Websites, mobile devices, and applications, as well as at offline retail locations through a range of payment solutions, including PayPal, PayPal Credit, Braintree, Venmo, Xoom, and Paydiant products. The company's platform allows consumers to shop by sending payments, withdraw funds to their bank accounts, and hold balances in their PayPal accounts in various currencies. Company description from FinViz.com.

They reported Q3 earnings of 46 cents, up 32%, that beat estimates for 44 cents. Revenue of $3.24 billion, up 21% and beat estimates for $3.17 billion. They guided for the current quarter for earnings of 50-52 cents and full year earnings of $1.86-$1.88. Mobile payment volume rose 54% to about $40 billion. Total payments rose 31% to $114 billion. Free cash flow rose 36% to $841 million and they have $7.1 billion in cash. They added 8.2 million active accounts with net new actives up 88%. They now have 218 million active customer accounts with 17 million merchants. They processed 1.9 billion payments, up 26%.

Q4 revenue is expected to rise 20-22% to $3.570-$3.630 billion. Paypal said payment platform Venmo was on track with expectations. The platform processed $9.1 billion in payment volume, a 93% YoY increase.

Expected earnings January 18th.

The company recently announced partnership deals with Baidu, Bank of America, Visa, JP Morgan, Facebook and Apple. They have changed their focus from disruptor to partner where they can process more transactions through the partners. The Baidu partnership will connect them to 700 million Chinese shoppers and 17 million Paypal merchants. The deal with Apple to allow Paypal in the iTunes store, AppStore and Apple Music will connect them to more than 1 billion IOS devices worldwide. The Facebook partnership gives them access to 2.01 billion users.

Thanks to recent agreements with MC/V, users will be able to transfer money directly from their accounts to credit/debit cards, which will become a big selling point. The new "Pay with Venmo" platform that will allow users to make purchases at retail locations is in test mode with Lululemon, Athletica and Forever 21 already accepting those payments. This is turning into another big revenue stream for Paypal.

PayPal just launched domestic payment services in India with 1.324 billion people.

Paypal signed a deal to sell $5.8 billion in its credit card portfolio to Synchrony Financial. The company said that would free up cash for acquisitions and expansion. The company raised its revenue forecast to $3.64-$3.70 billion for the current quarter. They raised earnings guidance from 37-39 cents to 52-59 cents.

Paypal closed exactly on horizontal support and the 30-day average, which has been support since February. The company is more of a bank than a tech stocks and should benefit from any further rotation into banks.

Buy Feb $75 call, currently $3.60, initial stop loss $68.45.


NEW DIRECTIONAL PUT PLAYS

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