Insiders are impeding the bullish progress of
On August 16, 271 million shares were freed from the
IPO lockup period
and another 243 million became available between October 15 and
November 13. The stock may not have declined since August 16, but
thanks to insider selling the shares haven't appreciated by much
, insiders sold more than 172 million shares compared to roughly
78 million purchased. This activity has kept the stock trapped in
a trading range during that period.
noted last month
, the stock looked to be making a bottom in the vicinity of clear
support near $19 (blue arrows). Though that support zone remains
intact, there is strong selling pressure at $24 (blue line).
Thus, a trading range.
This chart shows the price of
shares along with an important resistance area to
The company reported excellent financial results in October.
More impressive than the numbers was the confidence and optimism
CEO Mark Zuckerberg expressed about the mobile advertising
The positive earnings and guidance news launched FB to $24
overnight. Moreover, it appeared that the stock was ready to move
beyond this tricky resistance level and close the big gap left
over from a July slide (circle).
In fact, I believe the fundamentals are robust enough to bring
the stock back up to $27. The key hurdle for FB is no longer
financials, but overcoming an incredible amount of insider
selling. Unfortunately, the worst of this selling may be coming
The floodgates opened today when more than 800 million insider
shares were unlocked.
The recent fall from $24 to $19 is clearly based on the belief
that insiders will panic and sell today. However, if insiders
stay the course as Zuckerberg has said he would do, then FB could
rip right back to $24 - it's already started to make that move.
FB again because I don't believe that insiders will rush out of
their holdings near the $19 support zone. I have also sold put
options with a strike just below this zone. My stop loss for the
trade is $18.98 (for now), and I may use covered calls with a $23
strike later this week.
Besides FB, I think
is another undervalued stock that's due to rebound and I will be
preparing a full research report on it for readers of my
Top Stock Insights
Equities mentioned in this article: FB, AAPL
Positions held in companies mentioned above: