Facebook (FB) has had quite the day!
Currently up almost 17%, the stock continues to make a push towards new all-time highs, and there is a strong chance that by the end of the day it will have achieved that. The frustrations for traders who put a premium on managing risk is that unless you are willing to take the chance on a major move downward, holding FB, or any stock for that matter, is not a possibility.
For me personally, I don’t do the earnings plays because for every Facebook there is an eBay (EBAY) that will crush your portfolio with a 13% sell-off.
And since buying or shorting a stock with a belief that you actually know what will happen following an earnings release is a foolish proposition, a trader with a strong focus towards managing risk has to pass on these plays that look great in hindsight but utterly unpredictable prior to.
With that said, here is what I am currently watching from Facebook going forward. The last time it had an earnings breakout it quickly filled the gap in the days that followed. Granted it was nowhere near as large as this gap here, but it is a possibility that it will fill it with the weakness that has been seen in the market of late.
Otherwise, I would wait for a pullback to the breakout level shown below and then stage your entry at that level.
