Facebook closed the first trading day in the week at $233.50 – up 1.21% on the day. The big tech giant releases its Q2 2020 earnings Thursday after the market closes, and investors eye the $220 pivotal level.
The company recovered the losses created by the coronavirus crisis – and some more. By the time investors piled into tech stocks sending them to new all-time highs, Facebook had broken horizontal resistance at $220 and stopped at $250.
The company expects to show $1.38 EPS in the second quarter, declining for the second consecutive quarter. Tough for Facebook lately, as customers reoriented or stopped their advertising campaign during the coronavirus crisis to rivals such as Amazon.
Valuation does not help the bullish case either. At the current price, Facebook is valued at 495% price/sales ratio TTM difference to the sector, or 251% TTM difference to the sector on a price/book value. Not quite an incentive to attract new investors!
The earnings were moved from Wednesday to Thursday, following Mark Zuckerberg’s House appearance that got rescheduled due to services for Rep. John Lewis. This way, market participants have the time to digest the Fed’s message before getting to know if Facebook beat expectations for the second quarter or not.
Together with Amazon’s Bezos, Google’s Pichai, and Apple’s Cook, Zuckerberg faces accusations of monopoly that could heart the company’s performance moving forward. The fact that the hearing came in a week when all tech giants mentioned earlier release their Q2 2020 earnings is enough to divert investor’s attention form the charts and focus on fundamentals.
By the time that it reached the $250 area, Facebook share price made a series of marginal higher highs followed by an attempt to break below $220. It bounced on the first attempt, and a bearish scenario requires a break below. That is the entry, with a stop-loss at the highs and targeting two times the risk.
The $220 level acted as a horizontal resistance for two years prior to the price breaking higher during the coronavirus pandemic. A break below should trigger further pain for Facebook bulls.
