In the 1980s, there was a famous rap music anthem titled, "Don't
Believe the Hype." Well, I borrowed that admonition frequently last
year when the overblown hype over the
Facebook (Nasdaq: FB)
IPO reached a fever pitch. Nearly everyretail investor I knew
wanted to own Facebookstock , and it became a symbol of the
groupthink mentality that's so often infectsWall Street andMain
The hype got so bad, that in May 2012, I actually had a friend
ask me if they should borrowmoney on his home so that he could buy
Facebookshares . Sadly, many people (thankfully not my friend)
recklessly scrambled to buy Facebook shares immediately following
the stock's public debut, and many of those investors are still
sitting on a losing position.
I won't go into the epic fails on the part of Wall Street over
the pricing of Facebook shares, norwill I get into the details of
Facebook's hand in the mispricing affair. From a trading
standpoint, these flubs are ancient history. Today, smart traders
would be remiss in ignoring the recent buying momentum and
potentialupside catalysts that could drive Facebook significantly
higher in the next several months.
Since the beginning of 2013, Facebook shares have spiked more
than 11%, and they were up 5.26% in Wednesday trade alone. More
importantly, the stock has now breached the psychologically
significant $30 level. This is the first time the shares have been
in the $30s since embarking on their major sell-off in July.
The buying in Facebook Wednesday was prompted by an invitation
-- and Imean that literally.
On Wednesday morning, Facebook sent out invitations to industry
watchers and the tech and financial press to an open house of
sorts. The event will be held on Jan. 15, at 10 a.m., at Facebook's
Menlo Park, Calif., headquarters.
Anticipation has been running high over just what is likely to
be unveiled at this event. Surely, founder andCEO Mark Zuckerberg
wouldn't invite the press over to kick the Facebook tires without
having something new reveal. Most pundits, including me, think Mr.
Zuckerberg is much smarter than that.
Now thespeculation is on as to just what the famous billionaire
has up his unkempt hoody's sleeve.
One theory is that Facebook is going to venture into the
hardware business, possibly with a smartphone of some sort. I don't
think this is too likely, as even Zuckerberg has distanced himself
from the idea. Then there is the speculation about some type of
tablet PC designed specifically with Facebook's social networking
software in mind. Again, this is a long shot, at least in my
What is much more likely to come out of Facebook presser is some
type of newpartnership oracquisition , which builds on the
company's prodigious social networking base. Some have suggested
that Facebook could enter into a deal with Twitter. Others have
speculated that Facebook will make a move to enter the music
delivery business like a
Pandora Media (
, or even the movie industry like a
Netflix (Nasdaq: NFLX)
We'll find out precisely what's unveiled soon, but one thing is
for sure this week: Facebook has succeeded in unveiling a wholelot
of buzz surrounding the company's next move -- and that's been
great for traders betting on the long side.
I suspect that if there is an announcement soon that's viewed as
a positive, both by the tech press and the financial press, then we
could see Facebook shares surge to $35 in the next 8 to 12 weeks.
That's more than 14% upside from current levels -- and that's
certainly a reason for traders to, as they say, "Like" Facebook
Action to Take -->
Buy FB at themarket price . Set stop-loss at $27.90. Set
initialprice target at $35 for a potential 14% gain in three
This article originally appeared on ProfitableTrading.com:
Facebook May Finally Live Up to the Hype and